The Credit C.A.R.D Act of 2009 is now in effect, beginning Monday February 22. With the consumer protection it provides, the new rules are, “…shifting the balance of power back to the consumer and… holding the credit card companies responsible,” as President Obama said in a statement earlier this week.
One C.A.R.D. Act rule in particular has the potential to save you a substantial amount of money.
Your credit card company is now obligated, by law, to tell you how long it will take to pay off your outstanding balance. As you may be aware of, paying off only the minimum balance each month will incur steeper payments on interest over time. More payments on interest, in turn means it will take much longer to pay off your total balance. Depending on what your balance is, you can potentially save upwards of $1,000 dollars by paying more than the minimum balance each month.
Now, thanks to the C.A.R.D. Act, your credit card company will make it easier to visualize just how much you can save over time. For example, you may find this graphic on your bill or e-bill:
Please note that the monthly payment dollar amounts are rounded to the nearest dollar
Using the dollar amounts in the graphic as an example, it will take 17 years, 204 monthly payments of $45, to pay off the card balance of $5,000.00 – assuming no additional charges are made. Whereas, it will take six years, 72 monthly payments of $88, to pay off the credit balance with only $1312 in interest costs. By comparison, that’s a savings of $2831.00!
Use this week’s tip to pay off your debt, and save money while doing it!
For more on credit, see BillShrink for credit cards and find the best credit card to suit your borrowing needs.