As if there weren’t enough to keep track of in the world of personal finances, new rules regulating consumer credit cards took effect this past month. The good news: these changes are beneficial to you, the consumer.
The Federal Reserve is implementing these changes through the Truth in Lending Act, one of the more important regulations protecting consumers who borrow money. The recent changes were approved in 2009 and were implemented in two different phases in February and August, 2010. There are several notable changes, some of the most significant include:
Changes Implemented February 22, 2010:
- All credit card companies must include a box on your statement that discloses how long it will take you to pay your entire balance if you only make the minimum monthly payment. The idea being that if a card company is forced to admit how long it will actually take, the gory details will motivate you to get it paid off quicker. In addition, companies must also show the monthly payment required in order to pay the entire balance in three years.
- Your credit card company can’t raise your interest rate in the first year you have the card unless it was part of the original agreement you signed. If they raise the rate after the first year they A) have to give you 45 days notice; B) may only charge the higher rate on new purchases; and C) must allow you to cancel the account if you don’t accept the changes. Unfortunately, you are still responsible for the remaining card balance if you do decide to cancel.
Changes Implemented August 22, 2010:
- In most cases, you may only be assessed a $25 fee for late payments. Before August 22, you may have been charged up to $39 for every late payment. And, your fee can’t be more than your minimum monthly payment so keep track of this change because it may have significant benefits if you do happen to pay late on occasion.
- If your credit card company decides to increase your interest rate for any reason they must tell you why. And if they increase the rate, they must also reevaluate your account in six months to see if you have earned the lower rate again.
There were other changes implemented on both these dates so if you want more information visit the Federal Reserve’s website and review their fact sheets:
And BEWARE, unscrupulous credit card companies are beginning to find ways around the new regulations by doing things like marketing business cards to consumers that are not subject to the new consumer protections. As always, do your homework before getting a new card, and better yet, work with your local community banker to make sure you are getting a quality product that works for you.