Good news for credit card customers... starting on Monday, February 22, 2010, credit card companies must abide by new rules. The bad news you'll have to look out for some credit card traps.
We met Alex as she was leaving her bank. She was furious that the interest rate on her credit card had doubled; going from 5.9 percent to more than 12 percent. She says the reason for the interest spike: she took advantage of a special offer for a low interest rate that lasted a year.
"I was never late, I had been a customer for over 20 years, and that's the best rate they're going to give me now," Alex says.
According to financial expert Gail Hillebrand with Consumer Reports, despite new rules taking effect Monday, February 22, 2010, beware of low, introductory rates and offers to transfer balances from one card to another. She says the new credit card law doesn't protect you there.
Gail tells us, "The purpose of promotional rates is to get you in the door and have you charge it out before you realize how much it's really going to cost you."
Here are the highlights of the new law: Credit card companies must now give you 45 days notice before they can increase your interest rate, start charging you new fees, or make other big changes that affect the terms of your card unless you have a variable rate card.
Also, if you don't like those new changes they must give you the option to cancel your card before they take effect. Just know if you do cancel your card they could increase your monthly payment.
Companies also must spell out how long it will take you to pay off your card if you only make minimum payments.
When you open a new account, credit card companies can't increase your rate for the first 12 months... unless you have a variable rate card, are more than 60 days late paying your bill, or work out a special agreement with your card company and then fail to live up to it.
Gail points out another potential problem, an offer called over-limit protection.
"If you don't sign up for over-limit, you can't be charged that $35 over-limit fee so just ignore that offer, say no thanks to it and don't sign up for over-limit."
As far as billing, credit card companies must now mail your statement 21 days before your payment's due, keep your due date the same day each month, and not consider your payment late until 5 p.m. on the day it's due.
For more information about the new credit card law, click on the link below for the Federal Reserve System.