Made in the US

As GFC mud was slung in the States, Congress ducked for cover behind its credit card reforms — which were passed in May last year and have just come into effect. Whether similar changes should be expected in Australia remains uncertain, and will be some time off if they do eventuate. As far as the US reforms go, there’s both good and bad news for consumers.

On the upside, random interest rate changes have been abolished, as the centrepiece of the reform. How and when banks can raise interest rates is now tightly regulated, and they must give at least 45 days’ notice before increasing their interest rates. Furthermore, a review of penalty rates and fees is scheduled for later this year.

The major lenders have responded, however, by hiking up fees, and inventing new ones. So your balance transfer with JPMorgan Chase will now attract a 5% fee. Let’s hope that one doesn’t emigrate down under.

And credit card rewards have also been hit with various creative penalties, such as no points accrued on purchases if the customer is late with a payment (courtesy of American Express co-branded cards).

One of the big wins (for consumers) is restrictions on credit limits, and more stringent credit cards application processes, with lenders tightening up access to credit. Which may seem rough to those struggling to find a provider, but will hopefully lead to fewer borrowing more than they can afford.

Australia is usually a couple of years behind American credit card trends (for example, the 0% balance transfer), so it’ll be interesting to see which, if any, changes trickle through to the domestic market.

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Made in the US was last modified: June 29, 2015 by Rohan Gamble

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