The Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union Administration will vote tomorrow on a set of new credit card regulation reform, which will dramatically change the relationship between you, the cardholder, and your credit card issuers. These new credit card regulation reforms are expected to take effect by 2010, and many of these new changes will substantially benefit you.
If you’re not keen on reading an entire legislative bill to learn how the changes affect you, have no fear, Shrinkage is Good has broken down some of the most important changes for you so that you can understand your new rights and how they affect you.
The 8 New Rules in Your Favor
1. No more universal default
Universal default allows card issuers to raise interest rates on customers’ base on the customer’s behavior on another unrelated account. For example, if you’ve missed a payment on your utility bill or have your credit score lowered, a card issuer may increase the interest rates on your account. This policy and practice would no longer be permitted.
2. Sufficient time to pay bill
Credit card holders will be provided with reasonable time to pay their bills. Card companies are now required to mail billing statements 25 calendar days before due dates, eliminating the current minimum notification of 14 calendar days.
3. Protection against arbitrary rate increases
Credit card companies can no longer arbitrarily change the terms of their contracts with a credit card holder, thus banning the practice of “any-time, any-reason re-pricing.” If a card holder is subjected to interest rate hikes due to legitimate reasons, card holders now have the right to cancel their card and pay off the remaining balance with existing interest rates and terms.
4. Proper and timely notification of rate increases
Credit card companies are now required to provide cardholders with 45 day notice of any interest rate increase, and card holders will now have 3 billing cycles after the rate increase to say no to these new terms.
5. Fair allocation of payments
Credit card companies will now fairly allocate payments on balances with different interest rates. For example, you may have a low balance transfer rate on your account with a higher interest rate for purchases. Current practice has credit card companies applying your payment to the lowest interest rate transaction first, thereby extending the time for you to pay off higher interest rate balances.
6. Right to set limits on credit
Credit card companies will have to provide consumers the option to have a fixed credit limit that cannot be exceeded. This also prevents card companies from charging over-the-limit fees on a cardholder with a fixed credit limit.
7. No more double-cycle billing
Double-cycle billing allows for credit card companies to compute finance charges base on purchases made in current billing cycle rather than previous billing cycle. This policy hurts consumers who pay off their balances in full in one statement period but not the next. Credit card companies will now be prohibited from using this double-cycle billing practice.
8. Protection from due date gimmicks
Payments made by a cardholder before 5 P.M. EST on the due dates are now considered timely. Credit card companies are also required to provide on every statement, a phone and interest address that a card holder can easily access to pay off balances. Consumers will now also have the ability to present proof of bill payment within 7 days of due date to waive any late fees imposed by a credit card company.
Is Your Current Card Compliant?
So which current credit cards are already compliant with these new rules? Check out BillShrink’s Credit Cards Bill of Rights to see which card issuers are already complying with which set of rules. Plus, use our tool to easily find out if your current credit card is compliant with these new rules.
Keep yourself updated on the latest money news and tips. Subscribe to Shrinkage is Good today and we’ll be sure to keep you well stocked on money saving advices.
top photo credit: Joe Hatfield