How they actually help protect consumers.
New Credit Card rules went into effect beginning in February 2010 and the final date of enactment of all new guidelines passed this summer. The new protections are under the guidance of the Federal Reserve for all credit cards issued in the USA.
When the card issuers plan to increase your rate or other fees.
Your credit card company must send you a notice 45 days before they can
• increase your interest rate;
• change certain fees (such as annual fees, cash advance fees, and late fees) that apply to your account; or
• make other significant changes to the terms of your card.
If your credit card company is going to make changes to the terms of your card, it must give you the option to cancel the card before certain fee increases take effect. If you take that option, however, your credit card company may close your account and increase your monthly payment, subject to certain limitations.
Although this ACT was to protect consumers, most of us know that we cannot afford to go without a credit card and are therefore forced to accept whatever the credit cards send us. Many consumers were very upset at just how little protection is actually offered.
• No interest rate increases for the first year. Your credit card company cannot increase your rate for the first 12 months after you open an account. There are some exceptions:
o If there is an introductory rate, it must be in place for at least 6 months; after that your rate can revert to the "go-to" rate the company disclosed when you got the card.
o If you are more than 60 days late in paying your bill, your rate can go up.
o If you are in a workout agreement and you don't make your payments as agreed, your rate can go up.
• Increased rates apply only to new charges. If your credit card company does raise your interest rate after the first year, the new rate will apply only to new charges you make. If you have a balance, your old interest rate will apply to that balance. This is a significant improvement; it used to be the new rate applied to the balance due once the new rate was in effect.
• Restrictions on over-the-limit transactions. You must tell your credit card company that you want it to allow transactions that will take you over your credit limit. Otherwise, if a transaction would take you over your limit, it may be turned down. If you do not opt-in to over-the-limit transactions and your credit card company allows one to go through, it cannot charge you an over-the-limit fee.
o If you opt-in to allowing transactions that take you over your credit limit, your credit card company can impose only one fee per billing cycle. You can revoke your opt-in at any time.
• Card issuers starting automatically allowing users to exceed their limit and charging them high fees for this without their approval.
• Standard payment dates and times. Your credit card company must mail or deliver your credit card bill at least 21 days before your payment is due. These changes are in the consumer's interest and make a significant change stopping some of the new tactics that the banks were instituting.
• In addition:
o Your due date should be the same date each month (for example, your payment is always due on the 15th or always due on the last day of the month).
o The payment cut-off time cannot be earlier than 5 p.m. on the due date.
o If your payment due date is on a weekend or holiday (when the company does not process payments), you will have until the following business day to pay. (For example, if the due date is Sunday the 15th, your payment will be on time if it is received by Monday the 16th before 5 p.m.).
• Payments directed to highest interest balances first. If you make more than the minimum payment on your credit card bill, your credit card company must apply the excess amount to the balance with the highest interest rate.
• No two-cycle (double-cycle) billing. Credit card companies can only impose interest charges on balances in the current billing cycle.
These new protections are great and help protect credit card users, but the banks and the issuers along with their lawyers and lobbyist are working hard to find ways around. Be a smart consumer and be aware.
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Barry Norman is a contributor to and blogger at firstcredit.net. For over ten years FirstCredit.net has provided consumers free information helping them make sense of credit cards and the financial industry. Whether you are a longtime cardholder or looking for your first credit card, FirstCredit.net can help you make informed decisions.
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