May 6 2009|05.12 PM UTC

David Tu

Credit Card Reform: Is Your Credit Card Still Sucker-Punching You?

Category: CreditTags: , , ,


Left: Credit Card Companies. Right: You.

Is your credit card still giving you the occasional surprising right-hook?

A couple of months ago, the Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union passed a credit cardholders “Bill of Rights” that’s aimed to further protect you from unfair practices by credit card companies. These rules are expected to come into full effect in 2010, and although credit card companies haven’t been in a rush to hop on the early adoption bandwagon, some of the new regulations are slowly being implemented.

Check If Your Credit Cards Are Complaint

If shuffling through a small pamphlet with extra small prints on credit card terms and condition isn’t your idea of an afternoon’s entertainment, no worries! We’ve dug through over 200 credit card’s fine print to make life easier for you.  Try our simple tool to see what rules, if any, your credit card currently complies with.

Simply type in your credit card’s name and select it from the drop-down list.  You’ll immediately be greeted with a “Bill of Rights” compliance list like the example below:

Is Your Credit Card Complaint? »

Does Your Credit Card Comply?

The example above is from the Blue Cash from American Express. As you can see from our list, American Express has allowed people the right to set limits on this particular credit card, and the card doesn’t utilize the practice of universal default or double-cycle billing.  The card still has some ways to go however, as it’s currently only compliant with 3 of the 8 rules set forth by the Fed.

If you don’t see your card listed in the tool, you can flip to the back of your credit card and call the customer service number and request the card company to send you the updated terms and condition related to your specific credit card account.

Key Terms to Watch For

Universal default – Universal default allows card issuers to raise interest rates to your account base upon your 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.

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 people who pay off their balances in full in one statement period but not the next.

Credit Card Companies: Not Rushing to Be Compliant

Base on a search of our database, credit card companies are not in a hurry to be compliant with the two rules listed below.  Unsurprisingly, these are the two changes that can have large beneficial effects for card holders.

Fair allocation of payments – Credit card companies will be required to 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.

Protection against arbitrary rate increases – Credit card companies will no longer be able to 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.

Unless the current bill in the Senate pushes for a compliance date much earlier than the 2010 date set forth by the Fed, expect the credit card companies to take a little bit of extra time to update your credit card’s terms and conditions.

Remedies If Your Card Isn’t Compliant

Take your business elsewhere – As the saying goes, vote with your dollars. If you’re tired of dealing with double-cycle billing, voodoo magic due date shifts — you should definitely consider switching to a company that will better serve your needs.

Call and negotiate – This method isn’t for everyone and your mileage may vary, but you can always call your credit card company and ask them to conform your account’s current terms and condition to more favorable terms.  This is especially possible when your credit card company is already offering more favorable terms to new customers, but haven’t gotten around to make the same offer to their existing customers.

New Protections On the Table

If you’re also a personal finance news junkie like us, you may remember that the House of Representative recently passed a bill to further supplement the regulations set forth by the Fed.  The bill is now making its way through the Senate and when finalized, will provide for additional (and perhaps earlier) protection for consumers. Woot!

Currently, the bill in the Senate may:

- Make the effective date of the bill nine months after the bill is passed. This will make the new credit card regulations come into effect much earlier than the deadlines set by the House or the Fed.

- Limit inactivity fees on gift cards not redeemed after an extended period of time. This wasn’t addressed in the recent House bill or the previous Fed regulations.

- Prevent interest rate hikes on card holders who are late on their payment. The House bill and the Fed regulations limits the interest rate hike, but allows for card companies to increase rate when payments are 30 days late.

Is your credit card compliant with the new regulations? Have you been subjected to interest-rate hike? Share your thoughts in the comments below.

Top photo credit: Artful Danni

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{ 1 comment… read it below or add one }

kim c. May 14, 2009 at 12:58 pm

They should make the new rules retroactive just like the credit card companies do to their customers now.

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