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Credit Card
How credit cards workInterest chargesBenefitsGrace periodThe merchants sideParties involvedTransaction stepsSecured credit cardsPrepaid credit cardsFeaturesSecurityProblemsProfits and lossesCanadaHistoryCharga PlateCollectible credit cardsControversyHidden costsRedliningCredit card numberingCredit cards in ATMs
How credit cards workInterest chargesBenefitsGrace periodThe merchants sideParties involvedTransaction stepsSecured credit cardsPrepaid credit cardsFeaturesSecurityProblemsProfits and lossesCanadaHistoryCharga PlateCollectible credit cardsControversyHidden costsRedliningCredit card numberingCredit cards in ATMs
Controversy
Credit card debt has soared, particularly among young people. Since the late 1990s, lawmakers, consumer advocacy groups, college officials and other higher education affiliates have become increasingly concerned about the rising use of credit cards among college students. The major credit card companies have been accused of targeting a younger audience, in particular college students, many of whom are already in debt with college tuition fees and college loans and who typically are less experienced at managing their own finances.A 2006 '' deals with this subject in detail. The nonprofit group Americans for Fairness in Lending works with ''Maxed Out'' to educate Americans about credit card abuse.
Another controversial area is the universal default feature of many North American credit card contracts. When a cardholder is late paying a particular credit card issuer, that card's interest rate can be raised, often considerably. Universal default allows creditors to periodically check cardholders' credit portfolios to view trade, thus allowing the institution to decrease the credit limit or increase rates on cardholders who may be late with another credit card issuer. Being late on one credit card will potentially affect all the cardholder's credit cards. Citibank voluntarily stopped this practice in March 2007 and Chase stopped the practice in November 2007.
Another controversial area is the trailing interest issue. Trailing interest is the practice of charging interest on the entire bill no matter what percentage of it is paid. U.S Senator Carl Levin raised the issue at a U.S Senate Hearing of millions of Americans whom he said are slaves to hidden fees, compounding interest and cryptic terms. Their woes were heard in a Senate Permanent Subcommittee on Investigations hearing which was chaired by Senator Levin who said that he intends to keep the spotlight on credit card companies and that legislative action may be necessary to purge the industry.
In the United States, some have called for Congress to enact additional regulations on the industry; to expand the disclosure box clearly disclosing rate hikes, use plain language, incorporate balance payoff disclosures, and also to outlaw universal default. At a congress hearing around March 1, 2007, Citibank announced it would no longer practice this, effective immediately. Opponents of such regulation argue that customers must become more proactive and self-responsible in evaluating and negotiating terms with credit offerers. Some of the nation's influential top credit card issuers, who are among the top fifty corporate contributors to political campaigns, successfully opposed it.