Wednesday, July 29, 2009

The 10 Changes To Credit Card Laws

Finally, the government has decided to do something to stop credit card issuers from taking advantage of consumers. On December 18, 2008, the Federal Reserve approved a series of rules that make major changes to practices within the credit card industry. Here is a list of the 10 main changes of the new credit card rules. Note: the rules listed won't take effect until February 1 or July 1, 2010, I've seen both dates published. We'll know on February 1st which it is.

1. No interest rate increases for the first 12 months of your credit card.
You can enjoy your interest rate for at least the first year after opening your new account with two exceptions. First, your rate could increase in the first year if the creditor disclosed a rate increase when you opened the account. Second, if you don't make the minimum payment within 30 days of the due date you'll be subject to a penalty rate increase.

2. No interest rate increases on pre-existing balances.
If and when your interest rate does increase, the credit card issuer can't retroactively apply the increased rate to existing balances. Only purchases made after the increase goes into effect will be subject to the new interest rate.

3. Rate increases require 45-day advanced notice, even penalty rate increases.
Banks currently get 15 days to notify you of an interest rate increase and they don't have to notify you at all for penalty rate increases. The increased time for an advanced notice will give you more time to respond to an interest rate increase.

4. No more double billing cycle finance charges.
The double billing cycle method of calculating finance charges allows credit card issuers to charge interest on balances you've already paid. The Federal Reserve has outlawed this expensive practice.

5. Limited fees for subprime credit cards.
Subprime credit cards can no longer charge up the cardholder's credit limit with fees. Now, fees are limited to 50% of the credit limit, but only 25% of those can be charged when the account is opened. The remaining fees must be spread over at least five billing cycles.

6. Billing statements must be sent 21 days before payment due date.
The current rule requires billing statements to be sent within a reasonable time for the consumer to make payment. The new rule puts a time period on that "reasonable time.

7. Payments received by 5:00 pm on the due date are on time.
The Federal Reserve recognizes that banks must have a cut-off time for accepting payments and sets that time to 5:00 pm. The didn't specify a time zone, so, sending your payment early is still a good practice.

8. Payments received the next business day after a weekend or holiday are on time.
If your due date falls on a weekend or holiday and your credit card issuer doesn't process payments on that day, your payment is still considered on time if it's received by the next business day. For example, that means the Monday after a weekend or December 26 during the holidays.

9. Payments above the minimum are applied to highest interest rate balances.
The minimum payment would go toward your low-rate balance, while the remainder of your payment must be applied to the balance with the highest interest rate. This reduces your interest cost over the life of the credit card versus the alternative of applying the complete payment to the low rate balance.

10. Billing statements must include year-to-date total of interest and fees.
Now, you'll be able to see just how much interest charges and fees you pay on your credit card. When the rules take effect, your billing statement will have to list the current month's interest charges and fees along with the total amount you paid during the year.

The bulk of this report is from at

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