What you should know about the new credit card rules

New credit card laws went into effect on February 22.   Advocates applaud the new rules, saying they provide the most sweeping changes in card protections for consumers since the Truth in Lending Act of 1968. 

So what do you need to know?

First off – sorry, the new law won’t help you pay off the debt you already owe. The average American was running a credit-card balance of just over $5,400 at the end of 2009, down about $200 from five years ago, according to TransUnion, a Chicago-based firm that tracks credit data.

But the new rules will make it easier for you to understand your bill and harder for companies increase your interest rate or terms on your card. The Federal Reserve has a great site listing the new rules, and tips on how to find a credit card and avoid fees:  http://www.federalreserve.gov/creditcard/ 

Here are Five important new rights for credit card holders from the new law, according to Consumer Action:

1. No changes in terms or rates in the first year of a new card, except...

- when a promotional rate ends

- if your variable rate adjusts

- if you pay more than 60 days late.

2. No rate hikes on existing balances.

- Interest rate increases generally apply only to new transactions.

- 45 days’ advance notice of any significant changes.

- Right to decline the change, close card and pay off balance over time.

3. More time to plan for and make payments.

- Same due date every month.

- Bills sent 21 days in advance.

- Payments received by 5 p.m. must be credited that day.

4. Control and choice on over-limit fees

- Cardholder can control and avoid fees.

- Over-limit fees cannot be charged unless customer “opts in.”

5.  New information on your bill.

- Length of time to pay off your current balance if you make only minimum payments.

- Strategies are given on how to pay off your current balance in three years.

- Bills explain what will happen if your payment is late.

Other new protections include...

- Whoopee! There is now a cap on high-fee cards. If your credit card company requires you to pay fees (such as an annual fee or application fee), those fees cannot total more than 25% of the initial credit limit. For example, if your initial credit limit is $500, the fees for the first year cannot be more than $125. This limit does not apply to penalty fees, such as penalties for late payments.  

- Protections for students. If you are under 21, you will need to show that you are able to make payments, or you will need a cosigner, in order to open a credit card account.  Also, if you are under age 21 and have a card with a cosigner and want an increase in the credit limit, your cosigner must agree in writing to the increase.  As a parent, this makes perfect sense to me!  Hard to believe it wasn’t a requirement before the law took effect….

The companies have complained about the law and are trying to find creative ways to recoup the profits they will lose now that they have to play by the new rules.  Later this week, I’ll blog about what you need to watch out for from your credit card company.  Already we have seen new fees on credit card use for overseas travel, according to the New York Times.

Stay tuned.  Let me know if you get any new offerings or letters from your credit card company, too.  What do you think of the new consumer protections? Did they go far enough?

Comments

[link building]

These new rules were make us easier to understand bills...

[How to get out of debt]

A credit card is different from a charge card: a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. Most credit cards are issued by banks or credit unions,

[medical billing]

credit are a big deal -- I think it's worth it for students to learn and to obtain a credit card when they are credit worthy. That's how it was when I was young!

[ffxiv gil]

The new rules will make it easier for you to understand your bill and harder for companies increase your interest rate or terms on your card.

[consumermom]

I agree students need to learn about credit and responsibility first -- before they get a credit card. The consequences of bad credit are a big deal -- I think it's worth it for students to learn and to obtain a credit card when they are credit worthy. That's how it was when I was young!

[cna classes]

this makes perfect sense to me! Hard to believe it wasn’t a requirement before the law took effect….

[Credit Card Application]

the new law won’t help you pay off the debt you already owe. The average American was running a credit-card balance of just over $5,400 at the end of 2009, down about $200 from five years ago

[first credit card]

this new credit card act might be considered as bad news for some students it would be more harder for them to acquire a student credit card but let us look at the advantage of it. A credit card can help a student learn the true meaning of being responsible but let us not forget that many others who suffered bad credit because of incorrect credit card use. Bear in mind that how you handle your account can affect your credit history.