subject: How Do Credit Card Reforms Affect Consumers? [print this page] The recent announcement by the government that a series of new credit card laws are to be introduced before next year has meant an instant reaction from the credit industry but how to credit card reforms affect consumers?
All of the planned reforms are designed to result in a far more just treatment of the consumer but can also lead to a decline in profit for credit card providers and thus less eye-catching deals.
Among the agreed amendments are a right for customers to be provided with information and guidance as well as a right to opt out of any proposed changes to their credit limit or interest rate.
A wily habit of providers of arranging the order of payments so that the most expensive debt is last to be paid off, has also been rectified.
From early 2011, the highest interest debt will have to be paid off first by law.
The overall repercussions of these changes will mean a vast deal saved for the consumer but 533m lost for the credit industry over the first couple of years.
To negotiate this predicted loss, credit card providers have already begun to concoct other methods by which they can profit.
For example, following UK reforms the Virgin Money credit card made an important modification.
Virgin Money had long held the title of best balance transfer deal.
This peculiarly timed change in Virgin's 0% introductory period, from 16 to 14 months, is unquestionably connected with the new reforms. Many credit experts expect 0% balance transfer credit cards to severely decline after the new government policies.
The credit crunch has already meant that the number of balance transfer credit cards offering 0% deals has dropped by 10%.
Another example is a law to ban unsolicited credit card cheques has also caused an instant reaction.
The government argued that the cheques have unfairly high interest rates, which come into play straight after they have been spent.
This led a credit card provider to announce that they will stop providing any credit card cheques.
They stated that this modification has been caused by the decrease in demand for the cheques. This encouraging change to discontinue credit card cheques will hopefully be mirrored by many other credit card providers.
The government reform has certainly caused a visible ripple in the credit industry, with both positive and negative repercussions. There will no doubt be many more instances of change to report over the next few weeks and months.
In all, fairer treatment for all sometimes means those at the very top of the market will lose out but that seems a price worth paying.
