News Or Other Things You Need To Know About Credit Cards
For the first time in decades, there are some big changes coming in credit card interest rates, fees and credit terms. These changes started to take effect in 2009, but they will fully take effect by August 2010. These changes have come about because of a federal credit card law.
These laws and regulations aren’t just for new credit cards, they will change things on the credit cards you already have. It’s important that you understand what the changes mean to you. We are going to review the highlights of the changes and what your rights will be.
Limiting Interest Rate Hikes
Credit card issuers can only raise their interest rates under limited conditions. Condition examples include after a promotional rate ends, if there is a variable rate stated for the card, or if the consumer makes one or more late payments. Otherwise the interest rates can only go up after the first year. If the rate does go up, or there are any significant changes to the terms governing the credit card, the card issuer has to give at least 45 days advance notice of those changes. This time frame is meant to give the cardholder plenty of time to shop for a new card.
Consumer Opt Out Rights
If you don’t like the changes a credit card company has notified you of, you can now reject some of those changes. If the changes the card company wants to make are unacceptable to you, this means that you will agree to close your account, not make any new charges and under the old terms of the agreement, pay off the remaining balance. By law you get at least five years to pay off your balance, but you have to make the minimum payment due under the old agreement.
More Time To Pay
Card issuers now have to give consumers “a reasonable amount of time” to make their payments on the credit card bill. This translates into payments that can be due anytime after 21 days from the time they are mailed or delivered. This came about because some due dates were moved up without notice and the payment would be due a couple days after the consumer got the bill. This caused a significant amount of late fees.
The new law also governs cut-off times. Instead of setting arbitrary deadlines for the company to receive payments, the new law sets the cut-off time after 5pm on the due date. If the date and time falls on a weekend, holiday or anytime the card issuer is closed for business, then the issuer can’t start assessing late fees until the next time they are open for business.
Clear Consequences of Minimum Payments
The credit card issuer now has to tell you the consequences to making only the minimum payment on the account. This means they have to tell you how long it will take you to pay off your entire balance if you only make a minimum payment. The second piece of information that they are now required to give consumers – is how much the payment would need to be each month if you wanted to pay the entire balance within three years. They also have to tell you the total amount of interest you will pay if you pay the bill off with minimum payments.
Highest Interest Paid First
Does your credit card charge different interest rates for different things? For instance, charging a higher rate of interest for cash withdrawals. Then according to the new law, any payments made on the account that are over the minimum payment amount, now have to go towards first paying off the balance for the amounts being charged the highest interest rate. Before this new law, industry practice had the amount over the minimum payment going to the balance with the lowest interest rate.
There are only a few of the changes. There are many more and they are well worth reading and understanding so that you know your rights and privileges as you are dealing with credit card companies. Some of the new changes only affect student credit cards and some only affect credit cards that are given to lenders with low credit ratings. But there are many additional changes that affect all credit cards so make sure you understand what they are.
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