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How the New Credit Card Laws Could Affect You
How the New Credit Card Laws Could Affect You
Over the last few months credit card companies have begun to send out notices to their customers on how new credit card rules will affect them.
San Diego,
CA,
United States of America
(prbd.net)
10/02/2010
"credit cards, credit, credit card law"
Over the last few months credit card companies have begun to send out notices to their customers on how new credit card rules will affect them.
They may look like junk mail – clean, blank envelopes that may not catch your attention. But you should open them and read them carefully!
It is important to read these notices because they are probably a direct result of the federal Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act 2009) that will take effect February 22, 2010.
The law includes restrictions on over-the-limit fees, the marketing of credit cards to adults under 21 (college campuses) and dramatic changes in how issuers can impose interest rate increases.
When you get the notice from your card issuer, these sections are very important to you and your accounts:
• Annual percentage rate – Your APR on existing balances can be raised only if you don't make your minimum monthly payment within 60 days of the payment due date.
Card issuers can still raise your APR for future transactions even if you're not 60 days late, but they must give you at least 45 days prior notice of any rate increase. You can “opt out” and not accept the rate change and pay off the balance at the prior rate. However, opting out means you will have to close your account and they may ask for more of a minimum payment. Closing the account will have a negative effect on your credit score. How much effect it will have depends on the length of time you have had that account and what your credit limit is with that account. If you do not respond to the company regarding the notice of change to your APR, the company will assume you have accepted the rate change.
Currently millions of customers are seeing their rates rise. This could be for any number of reasons, but is mostly because card issuers want to make changes before the law goes into effect. This is happening to millions of people, even those with great credit scores.
• Over-the-limit fees – Issuers are saying they're eliminating over-the-limit fees, but that's not out of the kindness of their hearts (even though they would like you to believe that). This is cutting into their profits.
The law requires credit card companies to obtain a cardholder's permission to process transactions that would push your account over your credit limit.
Do not accept this option! Be disciplined and keep your credit score up by staying within your credit limit – way under your credit limit. You should never carry a balance more than 30 percent of your credit limit.
The card issuer can still decline to approve transactions that exceed your credit limit, so it's more important than ever to know how close you are to your limit.
• Universal Default and default pricing – Issuers are eliminating Universal Default and default pricing meaning that your rate on existing balances will no longer be raised for being a few days late with your payment on the account in question and other accounts you may have.
But you will still be charged a late payment fee!
The credit card law bans rate increases on existing balances because of a history of late payments on other accounts and severely restricts retroactive rate increases because of late payments.
All these changes are good for consumers, but you should aim to pay off your credit cards as quickly as possible and make all your payments before the due dates.
• Minimum payments – When the law takes effect, card issuers will have to apply any amounts you pay over the minimum payment to pay down balances with the highest APRs instead of the lowest APRs, as many of the card companies do now.
Here's an example: Let’s say you have a credit card with two balances (more than two is not unheard of). The first balance has a promotional APR of 2.99 percent and the second balance has an APR of 17.99 percent.
Under the law, if your minimum payment is $200 and you pay $250, the extra $50 will be applied to the higher rate balance.
Bottom line, pay as much as you can afford over the minimum payment. This is nothing new, but can even help pay off the account more quickly than in the past.
• Finally - These laws are not here for them to be taken advantage of. We, as consumers, are still responsible for our debts. All the old rules still apply, make sure you pay your bills on time and make sure you are using your credit wisely. The government can’t always protect us from ourselves. We have to take responsibility for our own actions and that includes doing everything we can to pay off our debts.
For more info: http://www.debtwave.com
About
Community Outreach Department
8665 Gibbs Drive #100
San Diego, CA 92123
Toll Free: (888) 686-4040 option 6
Fax: (858) 751-2608
Email: education@debtwave.com
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