What the New Credit Card Regulations Mean to You and Your Money
By: Amanda Anderson
While the Obama Administration is currently focusing on reforming health care and fixing a broken economy, the Credit Card industry has also been an important part of President Obama’s agenda. Consumers everywhere can breathe a sigh of relief for the new credit card regulations that will prevent any additional mistreatment from Credit Card companies.
Last May, President Obama created new Credit Card laws on behalf of consumers who have experience mistreatment at the hands of unfair credit card provider practices.
“With this new law, consumers will have the strong and reliable protections they deserve. We will continue to press for reform that is built on transparency, accountability, and mutual responsibility – values fundamental to the new foundation we seek to build for our economy,” President Obama said.
The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 makes many changes to a deceptive credit card industry. Here are the new changes and how they will affect you.
Card Holders Will Have More Time to Pay Monthly Bills
You heard me right. Credit card issuers must give card holders more time to pay their credit card bills. Under the new laws, you must receive at least 21 days to turn in payment after you have received after the bill has been receiver or delivered in the mail. Credit card companies can no longer change payment due dates at any notice.
Credit Card Companies Must Be Honest About Minimum Payments
If you are paying the minimum payment on your monthly credit card bills, credit card companies are now required by law to disclose the consequences of only paying the minimum monthly payment. In short, card holders must be informed of how long it will take to pay off their credit card by paying the minimum payment.
No More Early Deadlines
Under the new law, payments will no longer be due in the morning hours. It is now illegal for credit card companies to set payment deadlines before 5pm. Late fees will no longer be acceptable for deadlines at 5pm on weekends and/or holidays.
Balances With Higher Interest Will Be Paid First
If you have multiple accounts that have different interest rates for different types of purchases, all payments that exceed the minimum payment will go toward the balances with the higher interest rates.
Limit of Interest Rate Hikes
Hikes on interest rates for existing balances would only be allowed for limited conditions. Interest rates on new transactions can only be increased after one year under the new laws. Also, any changes to term of account cannot be made unless card holders are notified 45 days in advance.
The Right to Opt of Certain Changes to Account Terms
Card holders can now opt out or reject certain changes to the terms of their account. When card holders opt out, they agree to close their accounts and pay off the balance under the original terms of the account. Under this plan, card holders will have at least 5 years to pay off the balance.
New Age Restriction
Credit cards can no longer be issued to consumers under the age of 21, unless they have adult co-signers or can provide proof that their income is high enough to make monthly credit card payments. Credit card companies must also stay at least 1,000 feet away from college campuses as they offer gifts to students in exchange for card membership.
The End of Double Cycle Billing
Charges on outstanding credit card balances will based on the current cycle only. No longer will previous cycles be considered.
Restriction on Over-Limit Fees
Card holders must now opt in to over-limit fees. If they choose to opt-out of over-limit fees, their transactions will be rejected if they go over their credit limit. This will prevent the accumulation of over-limit fees.
Changes to Subprime Credit Cards
Upfront fees can no longer be more than 25 percent of the credit limit in the card’s first year. Although their will not be outrageous upfront fees under the new laws, card holders will have to pay high interest rates.
Limits on Universal Default
On current balances, interest rates will not be raised due to payment records with unrelated companies. In other words, interest rates will not increase due to your payment history with your utility company or mortgage lender.
Although these laws will enforce stricter guidelines on the credit card industry, it is important that you be sure to manage your credit card debt at all times. Credit card debt can ruin your life and put you in a very difficult financial situation that you may not be able to get out of.
For more information on the new credit card laws, visit www.whitehouse.gov.