If you've been paying attention to the credit card industry, you know that there's room for improvement. For instance, there's the practice of "universal default," whereby if you're late with a payment to some creditor (even a library fine, in some cases), your credit card interest rate might get hiked. Fortunately, some card issuers, such as JPMorgan Chase
Well, some less voluntary changes to the industry may be afoot -- if a Democrat wins the White House in November. Both Sen. Hillary Clinton and Sen. Barack Obama have proposed banning universal default. The proposals would require card issuers to apply our payments to our credit card balance with the highest rate of interest, applying interest rate increases only to future debt and not current debt, and charging interest only on the loan and not on the fees.
Bill Hardekopf of LowCards.com notes that Clinton would also "cap interest rates at 30%, require lenders to get cardholder written consent before they increase the rate or change the terms, end double-cycle billing, and establish uniform payment deadlines." These are exciting ideas, although I'd like to see the rate cap set lower than 30%.
Meanwhile, Obama co-introduced the "Credit Card Safety Star Act of 2007," which will institute a five-star rating system for credit cards to help consumers choose between them. For example, if a card is able to hike your rate at any time for any reason, it would get one star. If it had to give you 90 days' notice, it would earn more stars. This may well lead to more card issuers trying to earn more points by becoming more consumer-friendly.
According to industry watchdog Hardekopf, Republican candidate John McCain has not released his position regarding credit cards.
One more upshot of this is that credit card companies may become less profitable if they have to deal with more restrictions. Keep an eye on issuers such as American Express
The world of credit cards and card issuers is a fascinating one. Learn more about how to make the most of your credit in our Credit Center, and in the following articles:
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. Discover Financial is a Motley Fool Inside Value recommendation. Bank of America and JPMorgan Chase are Motley Fool Income Investor recommendations. Try our investing services free for 30 days. The Motley Fool is Fools writing for Fools.