How The New Credit Card Legislation Affects You.

Credit Card LegislationAs many of you know, The Credit Card Accountability, Responsibility and Disclosure Act was passed a while back and some of the stuff coming out of it is just plain AWESOME.

Not only will it improve a lot of the shadyness going on, but it’ll hopefully get the average American back on track and *paying attention* again (see #4). It may also means entirely new fees to watch out for as the credit card issuers fight back, but all in all I’m personally pleased by it. While I promote smart leveraging of credit cards, I know very well of the trouble many people get into when they fall behind and it becomes a downward spiral. So if you’re one of them reading this, pay attention and see what we all have to look forward to! Hope is on the way, baby…

Credit Card Legislation: The Good :)

Money Magazine breaks down 13 of the new mandates that affect us (print edition: Aug, pg107) so that people like you and me don’t have to. Rather than list them in the same order as they did though, I figured I’d list them in order of the ones I think are MOST IMPORTANT first. Numbers 1-5 are the key ones in my opinion, followed by some others that are great, but not *as* sexy as the previous ones. But again, I pay my credit card off in full every month so it may just be that they don’t pertain to me. Let’s get started:

1. Payments in excess of the minimum owed must first be applied to the balance with the highest interest rate, and then to other balances in descending order. YES!!!! OMG this helps so many people. Even I have fallen for this at times. You have your normal rate set at let’s say 6%, and then you withdraw cash @ 18% due to something unexpected and quickly turn around the next day and pay it off “in full”. That might be fine and dandy but the old rules say you just paid that XXXX worth of $ towards the 6% instead of the emergency 18%!!! And if you have a large balance already that you can’t wipe out? Sucks to be you. But now anytime you pay money it goes to the highest first, and THEN the next lower one in line. A++ politicos. (by Feb 2010)

2. Applicants under age 21 must have an adult co-sign, or show proof of income for approval. DAMN that’s genius! Not only does this make the kid think twice, but now it puts more responsibility on the parent :) Again, another A++ for the nation. (by Feb 2010)

3. Issuers can’t offer sign-up gifts on or near college campuses. Looks like no one will be getting any free shirts or stress balls anymore! Do you hear that Debt Free Dad of 6? If this were around when you got one of the first credit cards in history things might be better. A+ (by Feb 2010)

4. Issuers must indicate in statements how long it will take to pay off a balance (and the total cost) if you make only minimum payments. WOW. I guess sorta like a mortgage, eh? If this doesn’t help educate the average American, I don’t know what will. A+ (by Feb 2010)

5. Cardholders assessed a penalty APR for late payment can reclaim the lower rate if they pay on time for six consecutive months. Sexy! So no more “Well I’m screwed now and there’s nothing I can do about it”-type mentality. You mess up, you pay the penalties, and you get right back on track 6 months later. I’m all for that. (by Aug 2010)

*****Other Great Ones****

6. Statements must be mailed 21 Days before bill is due (up from the current 14). (by Aug, 09)
7. Issuers have to give 45 days’ notice (vs. 15) before increasing interest rates and fees. (by Aug, 09)
8. Issuers can no longer raise rates on an existing balance, unless payment is more than 60 days late or a teaser rate expires. (by Feb 2010)
9. Teaser rates must be in effect for at least six months. (by Feb 2010)
10. Except for expiring teasers, the rate on new purchases can’t be hiked in the first year. (by Feb 2010)
11. Over-limit fees can be applied only if a consumer opts in for approval on going over the credit limit. (by Feb 2010)
12. Issuers can no longer practice “universal default” – that is, raise your rates if they learn that you were late on another account. (by Feb 2010)
13. In calculating finance charges, issuers cannot average in daily balances from the previous billing cycle. (by Feb 2010)

Credit Card Legislation: The Bad :(

Okay, so this new legislation is AWESOME in so many ways, but what about the consequences? You better believe the credit card issuers aren’t going to just take it up the $%!* and let go of all that money. Instead, Money Mag predicts that we have the following new charges to look forward to:

  • Late Fees: We may see a rise from $39 (average in ’09) up 25% to around $49 in 2010!
  • Customer Service Calls: Get the first one free, and then pay $4 for each additional call/month!
  • Credit Line Increases: If you call to increase your credit line, you may now face a $35 fee.
  • Cash Advance: Perhaps @ 4% with no cap. That cap one will get ya…
  • 2nd Card: Need a 2nd card? Pay them $30 extra (instead of nothing right now).
  • Paper Statements: Remember how they always want you to “save the Earth” and go electronic? Maybe now they won’t be as pushy if they’re charging you $4 PER MONTH!
  • Credit Card Rates: And finally, they predict average credit card rates to go up to 15.07% by Feb. 2010 – up from an average of %13.76 in June of ’09. Boooooooo.

So what’s my overall take on this? I say LET’S ROCK IT OUT!!! Yeah the extra fees/charges/rate increases will suck for all those not paying attention, but guess what? PAY ATTENTION. We all slip up some time (except for maybe Brad who never uses credit cards), but the pros heavily outweigh the cons here. Credit Card Accountability, Responsibility and Disclosure Act – I love you.

Related posts you might enjoy:
It’s all About the Credit Cards Baby! 4 Steps to Success…
I’m all for The Credit Cardholder’s Bill of Rights no matter what.
Credit Card Roulette – To Play or Not to Play?

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