New Credit Card Legislation

By Stew

In February of 2010, the new Credit Card Accountability, Responsibility and Disclosure Act will go into affect. If you do not use credit cards, you will not be directly affected by this change. The only changes that you will see are higher fees on your regular bank usage as financial institutions try to find other ways to increase revenue. Here are the changes with a few comments from me (as usual):

  • Your rate for existing balances will no longer be raised for being a few days late with your payment. You might still be charged with a late payment fee. I have never had a problem in this area, I always figured that losing a great rate was part of the price for the privilege of buying stuff with the credit card company’s money.
  • Your Annual Percentage Rates on existing balances can only be raised if you do not make your minimum monthly payment within 60 days of the payment due date. Once again, never had a problem here, but the response from the cc companies will probably be to set the regular APR’s higher in the first place.
  • You will not be charged a fee for going over your credit limit. Transactions might still be declined if you go over your limit. I think this is a good, common sense change. If it is really a big deal if you go over your limit, the cc company can decline the transaction. If you are a customer who makes payments on time, it is actually in the cc companies best interest for you to spend more than your limit.
  • Any amount you pay over the minimum payment will now be used to pay down balances with the highest Annual Percentage Rate. So, in the past, if you had a 0% APR balance transfer of $3,000 on a particular credit card and then made $500 worth of purchases at a purchase APR of 14.9%, your payment of $70 would be applied to the lower rate balance transfer. You would have to pay off the entire $3,000 balance transfer before your payments would be applied to the $500. Obviously, this would result in higher profits for the credit card company. I don’t like this because I think it will diminish and dilute the number and quality of 0% introductory credit card offers. I like them and I was never burned by any of these strategies by credit card companies. Rats.
  • Your payment date will always fall on the same date each month. This is a good idea, because sometimes the date would vary by two or three days depending on where the weekend or holidays fell. I think there are times when credit card companies moved the dates maliciously, so hopefully that will be prevented. I was always annoyed by the credit card companies who sent credit card statements a couple of days before the payment was due.

The bottom line? Do not use your card and you will be in great shape!

Article by Stew

Photo by mlinksva

3 Responses (including trackbacks) to “New Credit Card Legislation”

  1. FinanceDad Says:

    My feelings are they will find one way or another to get you, the only way to truly prevent losing anything is to not deal with credit cards at all. Thanks for the info.

  2. Courtney Says:

    The last bullet point always annoyed me – we actually stopped using one of our cards because of this. I wanted to have one cc due in the first half of the month and one due in the second half, to make our budgeting simpler. So I requested a payment due date change. Within about 6 months, it had crept up to the beginning of the month again, because their billing cycle was only 27-28 days…even though last time I checked, most months had 30 or 31 days.

  3. Christina Says:

    I almost forgot this is going into effect in February. Our APR was recently raised to 17.99% for absolutely NO reason. I called them and tried getting it reduced, our credit score is excellent and we have never even been late on a payment. After 3 calls, they still wouldn’t budge. I came to the conclusion that they were doing that in order to make money before this act went into effect. We have a plan to pay off our debt within the first 6 months of 2010 anyways!