Starting February 22nd credit card users will wake up to new credit card rules as
laid out in the credit card reform act, signed by President Obama last year.
While the act is meant to protect the consumer and keep credit card companies in
check, some critics say in the long run it actually could cost consumers more.
The new laws could prompt the return of annual fees and cause many reward programs
to cease to exist.
It is also likely that credit cards will be harder to obtain, especially for those
with low income and those that have less than stellar credit. Here is a look
at what credit card holder should be aware of.
Card holders will no longer see crazy interest rate hikes. Credit card companies
will no longer be able to raise rates in most circumstances. There are of
course exceptions which include variable rate cards, a promotional rate that ends
or when a card holder is late on payments.
Card holders will now have the legal right to opt out of any changes the credit
card company makes to the card’s terms of agreement. To opt out card holders
will need to call the company and close their account. They will no longer
be able to use the account for any new purchases, but will be able to pay off the
remainder of their balance under the old terms.
Young adults will only be able to get limited credit. In order to qualify
for a credit card anyone under the age of 21 will need and adult co-signer or have
to show proof of employment that is enough to cover credit card bills. Credit
card companies will also have to move off campus to set up booths if they are trying
to lure students to apply for their card with free gifts. Highest interest
balance will get paid first. After the monthly minimum any other funds paid
on the account will go to pay off the portion of the balance with the highest interest
rate first.
Credit card holders will also get more time to pay their bills and clearer due dates
and times. Some of the biggest complaints of card holders in recent years
have been that credit card companies keep changing the due date giving them virtually
no time to pay their bill. Companies now will have to give card holders a
minimum of 21 days to pay their bill from the time it is mailed or delivered.
They can also no longer make payment due before 5:00 pm on the date payment is due.
Over the limit fees are will also be eliminated for the most part. Credit
card holders can opt in to the fees if they wish. Double or triple billing
cycles will now be illegal. Finance charges can only be computed on the current
billing cycle. Some cards in the past would compute interest due on multiple
cycles. Credit companies must also provide their card holders with information
on the true cost of making only minimum payments. They must disclose information
like how long it would take them to pay off their balance if they choose to just
make the minimum payment each month.
While the new bill does seem to provide some relief to current credit card holders,
critics are quick to point out the flaws. There is nothing in the reform act
to protect consumers with variable interest cards. Their interest rates will
continue to go up as the prime rate rises. Credit card companies will also
still have the right to slash credit, cancel cards and come up with new fees.
Another worry is that business and corporate credit cards are not covered under
the act.