New Financial Laws & You

How Do the New Financing Laws Affect You?

As of February 22, 2010, the new rules of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 were in effect. These laws were passed to limit some of the outrageous fees being charged by credit card issuers.

In many ways, the new rules will make your life easier. However, there are still places where the fees have room to grow, and grow they will, to make up for the limits in the other fees. The trick is to know where the limits are (and aren't), so you can avoid being charged excessive fees and save some money.

Here are some key changes of the new laws:

1.   Tired of your interest rate randomly increasing again and again? Existing balances can’t have the interest rate raised, except in these situations:

•    Expiration of a promotional interest rate

•    If your credit card has a variable interest rate

•    Hardship programs: you just finished or cancelled one

•    Late payment: more than 60 days late

2.   New accounts: No rate increases for 12 months! However, if the above situations apply in your first year, you can still be subject to a rate increase.

3.   Prior notice for rate increases. Your credit card issuer is required to give you a 45-day notice for any rate increases. This means no more surprises!

4.   Rate increases are reviewed every 6 months. After a rate increase, has been made, it may not be final. Every six months, the credit card issuer is required to reevaluate the plan and rates. In doing this, the issuer must lower the rate if the circumstances that caused the rate increase (such as late payments) have been resolved.

5.   Payments received immediately after a weekend or holiday due date are on time. So, if your due date is on a Saturday, and they receive it on Monday, it's still on time. The card issuer must also now process your payment as of the day it's received, if before 5 pm.

6.   Statements must now clarify the cost of your credit. They must clearly show you how long it will take you to pay off your balance if you only make the minimum payment. Plus, they must detail how much you'll pay in interest charges during this time. They must also show you the figures for if you'd like to pay off your balance within 3 years, instead.

•    This is likely to be one of the most beneficial parts of this law. When you see how much this credit really costs you, it will encourage you to pay more than the minimum payment to avoid adding these charges to your debt.

7.   New accounts cannot be charged more than 50% of your credit limit, and some of the initial fees must be spread out over a few months. This is good news if you have less than stellar credit, as you're in the target market for the highest-fee cards.

8.   Over-the-limit-fees are optional. This is a two-edged sword: if you don't opt-in to receive over limit fees, they will deny charges that will put you over your limit. If you don't want your charges denied, then you agree to over limit fees.

Some repercussions of the new laws mean that credit may now be harder for you to get. Also, you cannot get a credit card if you're under age 21. In addition, even with all the new rate increase rules, there isn't a limit in many states as to how high rate increases can go.