As of Monday, 2/22/2010, there are new rules as to how your credit-card statement will look, what it will contain, rates, age restrictions, and a host of new items aimed to protect the consumer. Remember TARP? Remember Bailout? Hello, new credit card rules.
To begin, let’s look at what they CAN’T do, presumably for our benefit, as listed in the Journal News today:
- They can’t automatically charge fees when credit-card users continue using their cards after reaching their credit limit. Such fees will apply only when a credit-card user agrees in advance.
- Increase interest rates on existing balances unless a customer is 60 days delinquent in paying a bill.
- Increase interest rates on future purchases without 45 days advanced notice.
- Raise the interest rate on new credit cards during the first year.
- Issue a credit card to people under the age of 21 who haven’t demonstrated that they can repay their debt.
- Monthly bills must summarize interest and fees by month and year-to-date “so people can actually see how much they are spending” said Nessa Feddis, senior counsel for regulatory compliance at the American Bankers Association.
Your monthly bill will include a calculation showing the credit-card user that by paying the minimum payment, how long it will take for the bill to be paid off- now that’s an eye opener. Be prepared to see fees going up, or new fees altogether. While the above and other changes do signify a major overhaul of the credit-card system, and does show that it is the beginning of change to protect the consumer, it does have its loopholes. Remember TARP? One of the biggest faults in the beginning was in their haste to institute the program and lend the funds; the money went out before they installed an oversight committee. How many times in the past 6 months or so has your blood boiled while you read about the big companies, who accepted TARP funds, taking these mega bonuses? Why? Because in their haste to get the money out there, they did so before stipulating how it could be spent. What’s does this have to do with the credit-card issue, you ask?
Four months ago I received a letter from Citi-Bank. My interest rate, currently at 9% was being raised to 14.99%. After being with them since 1982 with not one payment late, they were pretty much doubling my rate. Why? Because in a hurry to get these laws past Congress, just like the TARP issue, they left loopholes you could drive a truck through. For the past few months, most if not all the companies have been raising their rates in advance of today’s date- and not a soul said they couldn’t. Hmmm…just a small factoid left out?
What can you do about it? Check the interest rates your cards are charging you. Close out the ones that are excessive, or shift your balances. The biggest thing you can do? Don’t carry a balance. Pay your card off at the end of the month. Use this paradigm change to learn new spending habits, and budget your money more closely. Don’t spend what you don’t have. If you can pay them off, do so.
By the way, did I mention as part of this new bill the companies have no interest rate cap?
