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Banks Try To Figure Out How To Earn Profit Without Raising Interest Rates

By Faye Mergel
Published: Friday, June 11th, 2010

SOIMRF-00008513-001Despite US laws limiting changes to proposed interest rates for credit cards, US banks are now trying to outsmart law enforcers by finding other ways. The banks and other independent card issuers are going around and looking for small loopholes in order to find a justified way of raising the interest for using their credit cards.

The Credit Card Accountability, Responsibility and Disclosure Act was passed by Congress in May 2009. It banned interest rates increases and prevented companies form raising rates in the first year of credit card usage.

But federal banking regulators are not allowing these to happen. Especially since the country is still recuperating from the losses in the recent financial crisis, the government is extra careful in giving people what they need to survive in the most affordable rates possible.

Some banks have the reputation of pursuing debtors with poor credit. One of them is First Premier Bank. This bank charges $95 processing fee even before the credit card is used. More and more financial institutions are following suit in order to raise the profit that re being generated from the need for credit cards.

While this is not directly about the interest rates for cards, banks try to compensate for the profits lost in the limitation of interest rate charges. And without enough laws to enforce the limitation of these activities then all banks will find ways in order to milk money from their consumers.

Emily Winters, 54 years old, says “they’re finding all these little ways to get you.” While the interest rates is indeed kept to a minimum, there are times wherein she observed that her minimum monthly payment is continuously inflating. As of today, this minimum payment more than doubled to $623. And it can be deduced that even though the interest rate changes are slow to inflate, the banks still do something to recover their targeted profit in a period of time by charging the lost profit in some other legal way.

While the laws forbid raising interest rates, it does not say that the banks are forbidden to raise minimum payments. And J.P. Morgan’s Chase increased its minimum payment from 2% to 5% of the card balance. A spokesperson for the company said that the company means well and that it only wants the people to pay back as soon as possible. The shorter the period, of debt paying the better because there is also less interest rates to pay at the end of the day.

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