Credit Card Rules and Regulations

What the New Credit Card “Bill of Rights” Means to You

A Taipan Publishing Group Strategy Report
By Sara Nunnally, Senior Research Director, Taipan Publishing Group

President Obama has signed into law sweeping regulations for the credit card industry. Here is your guide to the new rules, and how they affect your wallet.

Americans owe $1 trillion on their credit cards. Nearly half of all cardholders have credit card debt over $7,000.

And for years, about 93% of major credit card companies have been able to raise interest rates whenever they chose, and 87% of companies had automatic penalty charges on past-due bills, even if the customer wasn’t yet 30 days overdue.

But now, credit card consumers have a “Bill of Rights.”

On May 22, 2009, President Obama signed the Credit Card Holders’ Bill of Rights, which slams the door on greedy corporate fingers thumbing through your cash.

Some of the provisions could mean drastic changes for consumers, so here’s your guide to three of the most important new rules and how they affect you.

Credit Card Rule #1: Interest Rates

Credit card companies can no longer hike your interest rate whenever they want. The Bill of Rights limits interest rate hikes to the following conditions:

• At the end of a promotional period
• After you have been notified of their new rate 45 days prior to the change
• After the first year of service
• After you are 60 days late on a payment

And if you have been more than 60 days overdue, and you’ve had your interest rate increased, the company must return your interest rate to your prior rate if you demonstrate on-time payments for six months.

Credit Card Rule #2: Fees

Fees, just like interest rates, were subject only to the will of the credit card companies, who could raise them at any point in time or add new fees. Under the Credit Card Holders’ Bill of Rights, the way companies use fees will change.

• No fees for paying your bill online or over the phone
• No over-limit fees until you “opt in” for the fee
• No more double-cycle billing that results in more finance charges
• Lower subprime fees for opening accounts

If your credit card is maxed out, you cannot be penalized with an over-limit fee unless you’ve opted in with your credit card company. If you choose not to opt in, then the transaction is simply rejected.

Credit Card Rule #3: More Time to Pay Bills

Under the new Bill of Rights, credit card companies must give consumers more time to pay their bills before imposing fees or raising interest rates.

• Your payment will be due 21 days after the bill has been mailed or delivered
• Credit card companies cannot impose specific time cutoffs for the due date
• Due dates that fall on holidays cannot be subject to late fees
• Companies must disclose to you the consequences of making only minimum payments
• Companies must also disclose how much you have to pay per month if you want to pay off your balance within 12, 24, or 36 months.

Credit card consumers have struggled with changing due dates, or payments received after close of business, and the overdue fees that come with being late. And far too often, consumers don’t know the true costs of paying off credit cards. These rights offer you a commonsense solution to managing your credit card debt.

The Bill of Rights Nuts and Bolts

There are other provisions that protect consumers, too. If you have two interest rates on your credit card account, e.g. if you have a balance transfer rate and a purchase transaction rate, the Bill of Rights declares that your payments must go toward the higher interest rate first.

The Bill of Rights also protects you from something called “universal default.”

Universal default is when you are penalized with a higher interest rate on your credit card from other unrelated credit issues. For example, if you’re late on your car payment, under the universal default clause that meant your credit card company could raise your interest rates.

The Bill of Rights states that universal default will no longer be legal.

And lastly, credit card companies will face restrictions when issuing credit to consumers under 21.

For example, the young consumer must prove that he or she has sufficient income to pay the debt, or a parent has to give permission. Also, the company cannot raise credit limits without further proof that the consumer can afford to pay the debt.

Credit 2010

Most of these new rights go into effect in July 2010. That means, between now and then, you, the consumer, are still under the “old regime” of credit card rules… And you had better believe credit card companies are going to use this time to maximum effect.

You could see higher interest rates in the meantime, and more cards issuing annual fees. You could lose your purchase grace periods and start accumulating interest at the time of purchase. Some companies could cut back on their rewards programs, or start tightening available credit. They may even create more fees or penalties for you.

And credit card companies are warning that when these rules go into effect, they will limit the amount of credit they are willing to extend, and also limit the number of people who qualify for credit.

In a way, isn’t this a good thing? Wasn’t it the overextension of credit, and the greed of companies and consumers alike that got us into this mess?

This Credit Card Holders’ Bill of Rights will protect you and every other credit card consumer from becoming overextended. And it will also help credit card companies from having so many defaults on their books.

“The business model has changed,” said Peter Garuccio, a spokesman for the American Bankers Association, to the New York Post.

It has: It’s put the U.S. consumer back in the driver’s seat.

With today’s volatile economy, you must protect yourself. And we have the perfect way for you to do that. Thanks to a federal law, you can now divert thousands of dollars per month from Wall Street’s wealthiest institutions... directly into your own bank account. By following the detailed instructions outlined in this letter, you’ll learn how to add $4,570 to $11,450 to your bank account every month.

Originally published June 03, 2009.

Other Related Topics: Consumer Spending , Credit Cards , Obama , Sara Nunnally

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