Update on the American Credit Card Bill of Rights

The Credit Card Bill of Rights was just recently passed in congress. Below are some new rules and my thoughts on them.

Credit Card issuers can only increase your interest rates if:

• When the increase is under a variable interest rate. – This is great news but will not help existing consumers who have got their rates jacked up recently. In fact many more face a similar situation before the bill kicks into effect
• At the end of the promised time period for a promotional rate. – This in my opinion, does not affect current practice. Most 0% balance transfer credit cards deals are for six months and they clearly state that the interest rate becomes a variable rate once the introductory period is over.
• If the required minimum payment is not received within 60 days after the due date – This will buy consumers some time if they are having some difficulty.

Future rate hikes – Card issuer can raise the rate on future purchases with 45 days notice after the first year. No notice is required for increases due to one of the reasons stated above.

Rules About Paying off on old terms
Credit Card issuers cannot change the terms for repaying a balance, unless they give the you either:

• Five years to pay off the outstanding balance at the old rate; or
• An increased minimum payment that has no more than twice the old minimum payment – this means they can increased your minimum payments but not more than twice of what you are currently paying at the moment

There have been more rules (and for the better in our opinion) with rewards to limits on fees and penalties

• If the interest rate increases because the minimum payment is not received within 60 days after the due date, the rate must go back to the original, lower rate if the consumer makes on-time minimum payments for six months – I think this is only fair because it gives consumers a chance and a reward for good paying habits
• No over-the-limit fees may be charged unless the consumer has asked for the account to be set up to allow transactions that will exceed the credit limit. – This is a great provision because credit card issuers have deliberately allowed charges to be made if it crossed their credit limit and then an over-the-limit fee is charged!
• An over-the-limit fee may be imposed only once per billing cycle if the balance is above the limit on the last day of the cycle – the fact that this law had to be passed just goes to show how abusive things have gotten
• No fees can be charged for making payments except for expedited payments arranged through a customer rep – again, the fact that this should even be in the bill is just ridiculous
• Penalty fees (late fee, over-the-limit fee, etc.) must be reasonable and proportional to the omission or violation. The Federal Reserve Board must issue rules to set standards to decide what fee levels are reasonable – This one is interesting because it remains to be seen what is deemed as “reasonable”.
• Two-cycle billing is prohibited – this one is long overdue

Credit Card issuers must also consider one’s ability to pay – How this one can be implemented is beyond me? Credit card issuers only ask you to fill in your income or household income upon the initial application. But how will they find out if you have had a raise or lost a job?

• Amounts in excess of the minimum payment must be applied to the highest interest rate, except in the last two months before a deferred interest balance is due – this one is long overdue

Rules on due dates, time to pay – This one is interesting in that it just goes to show the abuses that credit card companies have heaped upon consumers.

• Credit card issuers cannot set early deadlines for payments. Payments must be received by 5 p.m. at a location set by the issuer.
• Due dates will be on the same day each month – this may be a problem as I’d rather have them on the same date. What happens to autopay, which is always set up based on a date every month?
• Card issuers must deliver the bill at least 21 days before the due date

College Students – Perhaps the biggest impact will be those who are college students. It appears that it will be more difficult to get student credit cards

• Before issuing a card to a person under 21, the issuer must obtain an application which contains either the signature of a co-signer over 21 or information indicating an independent means of repaying any credit extended – looks reasonable but what happens if your parents do not have good credit?
• Card issuers may not raise the credit limit on accounts held by a person under 21 who has a co-signer without written permission from the co-signer – once again, this seems very sensible
• No prescreened card offers can be made to people under 21 unless they have consented to receive such offers – I really like this idea because I think the less offers one gets, the more unlikely he or she will get a credit card just because of an offer
• Card issuers cannot provide tangible gifts to students on campus in exchange for filling out a credit card application – no more booths sponsored by credit card issuers?
• Colleges must publicly disclose any marketing contracts made with a card issuer – colleges will not like this one at all. But with endowments under pressure???

Rules on Issuance fees – I think this rule has tremendous implications for the sub prime sector, particularly to issuers that issue credit cards for people with bad credit. These issues tend to issue cards from up front fees of as much $200. But worse of all, they tend to start someone off with a $300 credit limit. So even though you have a $300 credit limit, you end up with (in this example) just a $100 limit because of fee. From now onwards, issuers cannot finance fees and charges for opening a credit card where the fees and charges total more than 25 percent of the credit limit.

This is a guest post written by Mr Credit Card from www.askmrcreditcard.com. His site reviews credit cards and if you are looking for the best credit card offers, then you may want to head over their.

Tags: promised time period, college students, credit card companies, rate hikes, bill of rights, Mr Credit Card, student credit cards, barack obama