New Law Means Good News For Credit Card Customers



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.

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  • by Nicole Location: Colorado Springs on Feb 19, 2010 at 07:25 AM
    Ryan, Oh I agree! I live well BELOW our means. It seems that every time a new president is elected my husband is laid off. Even with a master degree, security clearance, and 17 years of experience, it still happens. I don't know how people do it that live paycheck to paycheck. If the slightest thing happens (taxes go up, gas goes up, etc.,) they can't pay their bills. When I was in the military as an E-5, I was approved for a $250,000 loan to buy a house. I just laughed. I knew I couldn't afford that. In stead, I bought a place for $71,000. Lenders are crazy. Why give out such ridiculous loans or such high credit card interest rates knowing full well that the person receiving them can't make such a payment and will inevitably default?
  • by Ryan on Feb 18, 2010 at 01:56 PM
    People are free to make choices with an assumption of risk involved with each of those choices. For ex, a typical family will purchase a home for $250k and after all payments for everything they only leave themselves with a few hundred dollars a month in discretionary income. Rather with my preferred type of risk, a household making $80,000/yr can only afford a $150,000 home while leaving much more room for discretionary income. Also, I know how much marriage and kids cost, which is why I won't be getting married until at least 28 and kids until at least 30. I do have a debit card which technically can do a "credit" transaction, but it's not really credit. The argument that saving 6-12 months of expenses is difficult in this economy is exactly the point - it needed to be saved little by little each month from years ago - for reasons like the bumps in the economy. @ Nicole, you're right - credit cards do have some benefits, but my argument is do not use it for day to day spending.
  • by Nicole Location: Colorado Springs on Feb 18, 2010 at 10:42 AM
    Ryan, I also wanted to add that the insurance on credit cards are great for traveling. One time, my family rented a car to travel cross country. We used our credit card to rent the vehicle, and hence the rental insurance covered the car. We were in a terrible accident, and our visa covered for the total cost of the car (about $20,000.) I was very grateful to have that protection! So, depending on how and why one uses a credit card, credit cards have many benefits!
  • by Nicole Location: Colorado Springs on Feb 18, 2010 at 10:36 AM
    Ryan, yes, it's wise to set aside money, but what do you do when that reserve has been used because you have been out of work for that length of time? It seems that every time my family manages to set aside a few thousand, something unexpected happens to drain it. I don't keep a balance on my card, but I do have it as a last resort backup plan. I can't pay my mortgage with a credit card, so available cash is reserved for that. I used a 0% for a year card to help out when my husband lost his job, and the month before it would start to accrue interest, I paid it off in full. Fortunately, I had the reserves to do so. I hope I can rebuild those reserves. My husband found a job, but at 1/3 less of what he was making. I had to give up our medical insurance as the rates for a high deductible plan was approaching the same as our house payments! I like the credit cards with cash back options. As long as I pay off the principle each month, I can actually make $.
  • by Realist Location: C/S on Feb 18, 2010 at 10:34 AM
    "Credit card companies must now give you 45 days notice before they can increase your interest rate..." Uh, that would be only on existing debt? yes, rates can change..and there's no limit on rates now. Gee thanks!
  • by Anonymous on Feb 18, 2010 at 08:52 AM
    I would also like to add, that although I have been lucky enough to not have to live off of the system as a single parent, I understand when it is necessary. I have, however, had to live off of credit cards in order to pay for food, rent, car and all of the other necessities of life. So even though it doesn't thrill me to have to use credit cards, they can be a benefit to have, when necessary.
  • by Anonymous on Feb 18, 2010 at 08:47 AM
    Are you kidding me Ryan? I'm glad you have the luxury of not being affected by the economy so you can save 6-12 months worth of expenses. I am not so lucky. I am a single mother of 4 kids, I was laid off from a low paying job, and make even less now. I just got out of the hospital with an emergency surgical procedure, which will cost me out of pocket, after insurance, more than I make in 3 months. So, please, in future, don't assume that because you have no financial concerns, doesn't mean the rest of us don't have "real life" hitting us hard.
  • by Ryan on Feb 17, 2010 at 11:06 PM
    Good law, but don't get yourself in that situation. Is there a reason to have a credit card? Not that I can think of, which is why I don't have one. If you use it for "emergencies" you should set up & save 6-12 months worth of expenses aside meant for those kind of things.
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