February 28, 2010-New York, New York– Since the inception of the newly approved and enacted Credit Card Accountability, Responsibility and Disclosure Act of 2009, many changes have occurred to protect the rights of the consumer. It has been clear in the last few years, credit card companies have been able to take advantage of consumers during hard economical times to make up for their own losses. Now, this act has been approved to help give the control back to consumers.
The Credit CARD Act, as it has been dubbed, eliminates double cycle billing, restricts the interest rate on preexisting credit card statement balances and requiring the consent of the customer before credit companies are allowed to charge over limit fees on statements. This has proven to be rather beneficial for many credit card users who have been trapped under the claws of credit companies.
Recently, we have seen the variable rate rise to 13.73 percent, 10 basis points up since last week. This is most likely due to the second round of new regulations set in place but the CARD act. Numerous credit companies dropped “over the limit” fees while other institutions have also changed their ways. Chase Bank for example increased the grace period an additional day to 21 days. Credit Card companies like Discover and American Express have also shown their support of the new law to their clients by placing tutorials and other information on their website for their customers to learn more.
Brad Nifdom, Spokesperson for CreditTime says, “We are relieved that the government has finally placed restrictions on the limitless power of credit card institutions and that these institutions have responded positively to these changes. “
Consumers are finally able to recover their power from credit institutions and fight the cycle of debt that many consumers have fallen prey to. In the upcoming months, we will definitively see the results that this Credit Act has had on the country and consumers.
About CreditTime: Credit time is the leader in providing consumers the most up to date, well organized, and easy to use financial information available today. CreditTime helps customers take control of their money and their life. CreditTime’s experts are comprised of many of the most important advisors in the areas of money, loans, credit, debt, and banking. CreditTime offers its visitors the most comprehensive and easy to understand financial information ever made available so customers can make sound financial decisions that can positively impact their lives.
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Companies issuing credit cards to students, and everyone else, have some new rules to abide by beginning the third week in the month of February 2010 and more that take effect as of August 2010. The new credit regulations are intended to keep the consumer informed and make sure they understand what they are signing up for and what the credit card will ultimately cost them.
New Credit Card Regulations
Student Credit Cards are especially affected by the new regulations that say companies cannot offer students-on campus-free gifts just for applying for the credit card.
But, what about those students that live off campus, can they still be enticed to sign up for a credit card by the offer of free gifts? The answer is yes, but there are rules and regulations that will govern some of these offers.
One of the new rules governing student credit cards states that the companies cannot allow under 21 year olds to sign up for a credit card unless the student can show means of repaying the debt himself, or they can get an adult to co-sign for him. The co-signor has to agree to take responsibility for the debt and prove that they can pay for it.
Changes In Monthly Statements
The monthly statement will also have some healthy changes. For one thing, the company now has to tell you how long it will take you to pay off your account if you continue to simply pay the minimum balance. That will be a shocking revelation for some as it generally takes a lot longer than you think. They must also inform you what monthly payment you need to make to pay the balance off within three years.
Another regulation that changes the monthly statement is that the company cannot change the billing date to a shorter cycle after the date has been set. The statement also has to be delivered to the card holder 21 days before the due date. This is to give the holder enough time to make a payment by the due date.
Nor can the company charge a fee any longer for payments made online, by telephone, or by mail-unless the payment is made on the day before or on the due date itself. The card holder has to make the payment within a reasonable time for the company to process the payment.
What They Can’t Do
Credit Card Companies have, for a long time, been able to charge late fees in such a manner that the card holder would actually be paying fees and late charges on amounts that had already been paid. This practice was referred to as double billing or two-cycle billing. They can no longer utilize this billing practice.
They can no longer raise the interest rates without notice, or retro-actively. The company issuing the card now has to give the card holder 45 days notice before raising the interest rates. And even better, their famous promotional interest rates have to be left in effect at least six months and unless the card holder has been told upfront that the rate changes in six months, the interest rates cannot be changed for a full year.
Summary
There are some good changes to Student Credit Cards with this new law, and some changes that affect all credit cards. You still need to read the fine print on your credit card statement as that’s the only way you will know exactly what interest and fees your company is charging you.
Companies will still be charging different interest rates. You need to understand what your cards fees, interest rates and terms are as they vary widely. Statistics show that over 75% of card holders have no clue what the fine print on their statements says, or what the interest rate is on a particular card. This percentage is expected to be higher in the student population.
You can manage your credit cards by reading your statement and knowing what it is that you are paying. If you are looking into getting a credit card make sure you do a comparison on the cards that are available.
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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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The new laws and regulations that govern consumer credit cards will also affect business credit cards. These changes have to do with credit card interest rates, fees and credit terms offered on business credit cards. These changes started to take effect in 2009, but they will be fully in place by August 2010. These changes have come about because of a federal credit card law.
The regulations aren’t just for new credit cards. These changes will also impact the credit cards you already have. It’s important that you understand what the changes mean to your business. Below you will find highlights of some of the changes and how this might change your business credit card.
Billing Changes
One of the biggest changes is that the card issuers now has to give your business “a reasonable amount of time” to pay the credit card bill. They are required to send the bill out with a bill due date that is 21 days after bill delivery. This change came about because some credit card due dates were so close to delivery date that it was impossible to pay the bill before late charges could be assessed.
The new law also limits payment cut-off times. Instead of setting an arbitrary deadline for the payment to be due, the new law sets the cut-off time after 5pm on the due date. The issuer can’t start assessing late fees until the next time they are open for business, so if the date and time falls on a weekend, holiday or anytime the card issuer is closed for business there can be no late fee assessed.
Minimum Payment Consequences
Another change to the billing is that the credit card issuer has to include on the monthly billing what the consequences are if you make only the minimum monthly payment on the account. This means you will know 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 now have to include on the statement – is how much the payment would need to be each month if you wanted to pay the entire balance off within three years. The statements will also include the total amount of interest you will pay if you pay the bill off with minimum payments.
Notification of Interest Rate or Fee Changes
One of the major changes under the new law is that credit card issuers can only raise their interest rates annually, or under limited conditions. These conditions include the end of a promotional period, or if there is a variable rate stated for the card, or if the business makes one or more late payments.
Otherwise the interest rates can only go up after the first year. The other change is that if the company is going to raise your interest rate or other terms, the card issuer must now notify you in writing with at least 45 days advance notice of those changes. This time frame is supposed to give the cardholder plenty of time to shop for a new card if they don’t like the new rates.
Opt Out Rights
Once the credit card issuer notifies you of a change, you now have the option to “opt out” of the card. If the changes the card company wants to make are unacceptable to you, then you can reject them. This means you agree to close your account and not make any new charges. Then you will be allowed to pay off the remaining balance on the card under the old terms of the agreement. By law you be allowed at least five years to pay off your balance, but you have to make the minimum payment due under the old agreement.
Summary
The above represents only a few of the changes to business credit card regulations. Make sure you read up on the changes and understand what your new rights and obligations are. Credit card issuers will be changing their card terms to meet these new regulations so be sure and read any communications that concern credit cards you currently have.
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We are in an era when banks are turning away business owners due to tight credit, so the merchant cash advance style loan is gaining popularity, despite the fact that these loans usually cost a great deal more due to much higher interest charges. Business or merchant cash advance loans are a valuable resource for some business owners who find themselves in a tighter commercial credit market with shrinking or canceled lines of credit from banks – plus the intense financial challenge of an historically severe recession and credit crunch.
But in 2010 – as the market for business cash advance loans is expected to see phenomenal growth – the government is in the middle of its own effort to enforce more stringent regulations on the financial industry. So in the coming months it will be interesting to see whether the cash advance industry – which mainstream lenders and big banks often complain about because it is not very well regulated – will be given new guidelines to follow.
As a typical example based on actual loans made by cash advance companies in recent years, borrowing $30,000 might cost $10,000 in future repayments through card sales. But although that is a very steep rate of interest it is sometimes the only game in town for a business owner whose bank will not offer them a line of credit or other form of loan to help them raise the cash they need to run their operation.
For many business owners the choice to take out this kind of more costly loan comes down to a simple calculation. They can forego the business cash advance loan because it costs too much, or they lose a lot more business or even face the possibility of having to close their doors or declare bankruptcy. Sure, they would love to borrow elsewhere for a fraction of the interest paid. But if nobody else will give them a loan they have limited options and then a cash advance business loan starts to look attractive.
Using our example of a $30,000 that costs $10,000, for instance, a business owner might have to pay $10,000 but if doing so enables him or her to stay in business and make a $50,000 profit then they still come out ahead by $40,000. Or if they are having a really bad year due to the recession, they might wind up just breaking even. But they can stay afloat and when the economy turns around the expense of $10,000 to keep their business and avoid a foreclosure or bankruptcy might look like a really good bargain.
Some might call a pricey business cash advance loan the lesser of two evils – but when an entrepreneur is faced with hard choices then sometimes paying more to stay in business makes sense and can be justified in a number of different ways. You do what you have to do to survive, and if you can get past those major financial challenges then you have an opportunity to keep the business going for another season. Manage it well and with a little luck surviving can evolve into thriving, which is why many business owners who have used cash advance loans would not hesitate to do so again if the circumstances required it.
In the meantime most of the major players in the business cash advance industry are not waiting around to see what happens in Washington, but they are starting to take the matter of regulations into their own hands. Whenever an industry is threatened with tighter rules and regulations it is generally best for them to be proactive and start setting their own standards and policing themselves. That can convince regulators and legislatures to back off, and that is why this year we will see more and more changes in policy at business cash advance lending companies.
They will likely put limits on how much they charge their customers, and some are already taking steps to minimize the cut of profits or revenues that they require from certain businesses – like the grocery business – where owners typically operate on very thin profit margins. That all spells good news for the consumer, because whether the industry starts to adhere to more reasonable guidelines on its own or through official regulation, it will make the loans more affordable for business owners.
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