New Credit Card Laws Go Into Effect February 22, 2010
By Michael Hughes December 7, 2009
“He that goes a-borrowing, goes a-sorrowing.” –Benjamin Franklin
Why it’s important: A new federal credit card goes into effect February 22, 2010. The new law will tilt the playing field toward consumers by removing some of the credit card industry’s most profitable and punishing practices. Consumer advocates favor it. Of course Credit Card issuers warn it will drive up the price of and limit the availability of credit cards at a time when the country needs more spending to stimulate the economy. Bologna! Credit card companies. You remember them right? They are tied to the largest banks in the country. Remember the ones who got the “bail outs” and are now experiencing soaring profits and overly zealous bonuses. Don’t get me wrong. There is nothing wrong with profit. I just want the money back that the banks, insurance companies and automakers, borrowed during the bail out. BOA recently said it would pay back $45B of bailout money, putting pressure on other banks to step up. While some banks have paid back their money (~$4B) most banks, insurance companies and automakers have not. Play fair, with Credit Cards, pay “US” back what you owe us and I will consider that a good start. In the meantime, expect those little notices to trickle down to consumers in the mail, with increasing interest rates. As much as 28 percent and more. One way to overcome this is to pay down your credit cards and keep them paid off every month if possible. If you don’t have the money, don’t spend it. Simple!
In the future interest rate hikes will be limited, such as when a promo rate ends or if a late payment is made. No more Universal Default-in other words no more raising interest rates when cc companies see payment records from utility companies and other unrelated creditors. No more random changes in due dates without notice, increasing the likelihood of late fees. Highest interest rate balances paid first. It has been the opposite up until now. Limits on overlimit fees. No more double-cycling billing. Therefore if you pay off your credit card every month the credit card company can not go back to a previous billing cycle to charge you interest. Upfront fees for people with bad credit cannot exceed 25 percent. Also credit card issuers are instituting a new rule on points, cash back and frequent flyer miles. If you don’t pay your card off every month you can pretty much kiss those goodbye. And last but not least credit card issuers must disclose to cardholders the consequences of making only minimum payments each month. Namely that it will take you well beyond a Millenium and the Mayan Calendar to pay this balance off if you just make minimum payments. Keep debt minimal especially when applying for a mortgage. The additional debt can add up and cause problems for the underwriter of the mortgage. Call me with questions.
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