By this time, you’ve heard much about the new consumer credit card laws that are effective February 22, 2010. However, you might still wonder just how these changes impact you. Be assured that they will… The below list provides a few things to watch for:
1.Interest Rate Increases - Credit card companies are still allowed to raise interest rates. However, the issuers must provide you, the cardholder, with written notice 45 days before the intended hike. In addition, rate increases on existing balances may come into play if the card holder is late on a payment, a promotional rate period expires, or if the card is issued with a variable rate. Interest rate hikes on new transactions can come into play once the account is over a year old.
The cardholder does retain the ability to opt out of the rate increase, but that means the account would close. Keep in mind that closing your account could impact your credit score. If you still wish to close your account, it might be prudent to obtain a new credit card first to insure you have a replacement.
2. Payments – Previously, consumers were charged fees based on ever changing due dates and times. The new rules attempt to limit fees by preventing card issuers from imposing arbitrary payment schedules. That means that the payment due date must fall on the same date every month. Payment delivery is accepted until 5 PM on the due date, and if the due date falls on a holiday, weekend, or day when the issuer’s business is closed, no late fees can be imposed. Additionally, one must be provided with at least 21 days to pay the bill after it is delivered.
3.Minimum Payments – Many consumers have misunderstood the impact of simply making minimum payments. The new law requires that issuers disclose how long it would take consumers to pay off their balances, under a minimum payment scenario.
If a cardholder wishes to pay off his/her balance in 36 months, the issuer must provide the holder with the required monthly amount, as well as how much of the payment would go towards principle and how much towards interest.
4. Payment towards higher interest rate balances first – Under the new requirements, all payments are applied toward the highest interest rate balances first. This is designed to shorten the time to pay off entire balances.
5.Credit Cards for individuals under 21 – The new law prevents issuing cards to applicants that are under the age of 21, unless co-signed by an adult, or the applicant provides proof of income. It also requires that credit card companies remain at least 1,000 feet from college campuses.
6. Over- limit Fees – In the past, if a consumer’s transaction put them over their credit limit, the card issuer could simply raise the limit, and impose an over- limit fee. Under the new rules, the consumer must opt in to the over-limit fee.
7. Double Billing Cycle – Under the new law, finance charges on outstanding balances can only be computed based on the consumer’s current billing cycle. This rule is aimed at helping consumers that have recently paid off their balances. They will no longer contend with charges that were based on past balances/cycles accruing to their current billing cycle.
A few final points are worth mentioning. The new law applies to consumer credit cards only, not business credit cards. While the law limits the circumstances of how/when interest rates can be raised, it does not impose caps on interest rates. Also, credit card issuers are coming up with new fees that fall outside the parameters of these restrictions.
Lastly, what you think might be “junk” mail, could in-fact be a notice from your card issuer. So don’t just throw it away. Please remember, be careful and be aware…
Brenda Brinz VanDeWeghe, J.D.
President
BBV Consulting LLC, Hamden, CT
BrendaTalkingMoney@sbcglobal.net
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