Thursday, December 18, 2008

Effects of New Credit Card Regulations

As an occasional user of Credit Cards for 0% interest offers, I have spent some time familiarizing myself with the new regulations passed yesterday. As such, I thought I would provide a short synopsis of the key points:

Goes Into Effect July 2010
Those of you looking for immediate relief will have to be patient.

More Lenient Grace Period

No longer will your credit provider be able to raise your rates if you have one payment that arrives a few days after the due date. In addition, credit card companies will need to provide a reasonable amount of time to pay of at least 21 days.

Reduction of "Universal Default"
No longer will your credit card company be able to increase your rate because you paid another creditor late (like the gas or cable company).

Increased Notice
The required amount of time in advance of a change to the terms of the account or increases in penalties that the credit card company must notify you is extended from 15 days to 45 days.

All Balances Treated Equally
No longer will credit card companies be allowed to apply your payment to lower interest rates before those carrying a higher interest rate. For example, any amount paid above the minimum payment will be applied to a cash advance carrying a 20%+ interest rate rather than an outstanding 0% balance transfer.

Deceptive Offers Prohibited
I did not find a lot of detail on what exactly this means, and I thought they were already regulated in this area. However, I would assume it's a good thing.

Holds Don't Count Toward Card Limit
No longer will a hold on funds be included in the calculation that determines fees for exceeding a card limit.

There are also some potential disadvantages being discussed:

More Difficult to Get Credit
The changes could make it more difficult for individuals with bad credit to get a "subprime" credit card with high interest rates.

Everyone Will Pay More
Some suggest that the cost of credit will rise for the majority of card holders due to the fact that credit card companies will stop offering such generous promotional offers as they will be more difficult to raise later.

To learn more, visit the links below (which served as my sources for this article): Article by Susan Tompor
Wall Street Journal
Credit Card Bill of Rights by Bill Shrink
Wall Street Journal Blog
AOL Money & Finance

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