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In 2009, Congress passed the Credit Card Accountability Responsibility and Disclosure Act, which was intended to curb the aggressive rate and fee hiking practices of credit card companies against consumers. But there’s evidence that credit card issuers are finding other ways to gouge customers. For instance, Pew Charitable Trusts reports that the median annual fee on credit cards climbed 18% between July of 2009 and March of 2010 to $59. The median balance transfer and cash allowance fees shot up 33% over the same time period. These actions do not violate the Credit Card Act.
However, there is another industry practice which some watchdog groups say doesn’t pass the smell test: rebate cards.
Citibank created this type of promotional offer in the fall of 2009. The idea behind rebate cards is that consumers have the chance to earn refunds on as much as 70% of their finance charges when they pay their bills on time. Sounds good, right?
The problem lies when customers fail to pay on time. Credit card issuers often revoke the rebate offers and boost the card’s annual percentage rates to lofty levels. Since the Credit Card Act doesn’t regulate these rebate cards, issuers say they are not breaking the law. Unfortunately, cardholders have little recourse against these practices – other than to avoid rebate cards in the first place.