Monday, Feb. 22, 2010 but what does that REALLY mean for us?
There’s lots of good news that I want to share with you, but there are also a brand-new series of traps as well (I’ll talk about those too at the end of this post.)
The BIGGEST thing the CARD Act will do for you and me is to to STOP Credit card issuers from increasing interest rates on existing credit card balances unless the borrower is at least 60 (SIXTY) days late on the account. This will eliminate the retroactive rate increases and the universal default clause where credit card issuers would periodically review an account holder’s current credit standing to determine changes in terms and annual percentage rates. If your rates have been increased in the last 6 months, this is exactly why - they’re trying to recoup the millions/billions dollars they’re going to lose once this ACT is in effect.
Credit card issuers will have to provide clear disclosure of account terms before a borrower opens an account. If the account provides a promotional interest rate period, the promotional interest rate will have to last a minimum of six months – not the usual 3 months or 30 days!
They will not be able to raise your interest rates on your new credit card accounts during the first YEAR the account is opened. Again, this rule will not apply if the borrower falls 60 days late on a credit card payment.
Credit card issuers will not be able to charge over-limit fees unless they obtain our consent to accept and process over-limit transactions beforehand. If consent is obtained, the card issuer will not be able to charge more than ONE over-limit fee per billing cycle. This has got to be one of my favorite laws of the CARD Act. Just like those damn BANK CARDS, my attitude was, “Don’t allow me to purchase something if it goes over my limit” If I’m a dollar over the limit, they would ALLOW the purchase ‘for my convenience’, but charge me a fee from 29 – 39 dollars! What the…???
Additionally, credit card issuers will not be able to charge an over-limit fee if interest charges or other fees are the sole reason for pushing the account holder over their limit. (Amen to that!! I use to be like, I didn’t use that card, how is it possible I’m incurring an over the limit fee? Well, thanks to the CARD Act – not anymore!!)
Credit card issuers will not be able to charge additional payment penalties for accepting payments by mail, phone, electronic transfer, or any other means, unless the payment is processed through an expedited service processor. No more additional costs for paying by phone – awesome!
If a due date falls on a weekend or holiday, the credit card issuer will not be able to penalize mailed payments that are received on the next business day. Payments received by 5 p.m. must be credited the same day. YES!!!!!
Double-cycle billing, a process where credit card issuers use the previous month’s balance to calculate interest charges for the current month, becomes illegal. Okay…This is HUGE here! Credit Card companies do this, well did this, with most of us NOT knowing about it. I use to say, “This should really be against the law,” and now it is.
Credit card issuers will be required to apply any payment above the minimum amount due to the highest interest balance first. In the past, you just paid your bill beyond the minimum balance and that “extra” would be applied to your lowest previous purchases/services – that’s why it takes most of us FOREVER to pay down a bill.
Credit card issuers will have to include a minimum payment disclosure that explains how long it will take to pay off the existing balance and the total cost in interest fees if the cardholder paid only the minimum amount due. Additionally, card issuers will have to provide minimum payment details and the total cost in interest to pay off the existing balance within 3 years. If we “see” how long it will take, then we will make better choices when purchasing on credit, right?
They will have to make account terms and cardholder agreements available to their cardholders on the Internet. (It is HARD to find any REAL information on our Issuer’s web site – now, everything will be just a click away – no more run-around phone calls and automated systems to trouble us.)
As part of the CARD Act, credit card companies will be severely restricted in how they market cards to college students, potentially shrinking an important part of their business. (Thank Goodness – most students have credit card debt to an average of $5,000.00 before they graduate.)
NOW, SOME “NEW” ISSUES TO WATCH OUT FOR:
Most CARDS will charge a 2% fee on all purchases made outside the United States (watch out all you online shoppers.)
Whereas 3% was once the standard charge for rolling over a balance from one credit card to another, I found out that JPMorgan Chase (JPM, Fortune 500) are now assessing customers a 5% fee.
If you’re 18 to 21 years old, you will need a co-signer on most cards. So MOM and/or DAD, when Junior can’t pay his bill, you will now be responsible.
Consumers with credit history less than PERFECT, may find it much more difficult to get a card or have their credit limit extended.
REWARDS on card will decrease as a result of the new laws. My CARD just sent me disclosures of my reward plan, I found out that I can no longer get FREE Hotel Nights and my child can no longer fly for FREE – using my points. Shoot – Jonathan stayed at some great resorts on my “points.”
American Express told me that they would not be able to accrue my reward points on my purchases if I’m ever late with a payment. I am NEVER late with payment, but if I ever am, I must pay a $29 fee to recoup those points. To be fair, American Express “CREDIT” cards (not charge cards) is the BEST card I ever had – they treat me like I’m a MILLIONAIRE every time…we should all be treated that way, whether we have millions or not.
Whereas in the past, banks could raise your annual percentage rate just for missing a payment on your cell phone bill or without giving a consumer much advance notice, such practices will soon be outlawed. Issuers now have to alert you at least 45 days in advance before raising your rate under the CARD Act.
In recent months, banks have moved consumers over to so-called variable rate cards, whose rates fluctuate based on the direction of the prime rate. And with that rate at historic lows, be prepared for at least a moderate increase in their APR at some point. Make sure you have NOT be moved to a variable rate card – check right now!
The new law also does not include any sort of interest rate cap banks and issuers can charge customers that are late on their payment by two months or more.
The CARD Act doesn’t absolve anyone from having to pay back their bills or take people out of harm’s way if they run into trouble – so you MUST be careful.
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Nice synopsis.
I have found some of my cards sending me the new variable rate change that they will be implementing. No problem- not only do I not owe them anything, but I am going to close the accounts. I don’t use them and their rates are asinine.
I have two cards with a balance. One I am trying to pay off asap (Chase) because they are high, but not higher than the store cards and my other one has an apr of 6.2% which no one can match and won’t be changing either. Why? Because it’s USAA and if anyone is military or retired military or honorably discharged and hasn’t taken advantage of everything USAA can offer is foolish. They have never treated me as anything other than a stockholder. We have everything thru them- cards, car ins, house ins, and bank accounts too (although they are not our regular ones). All the kids and grandkids have account numbers through my husband. The kid in college has her own accounts and a student credit card, that, although she is eligible to increase by $500 each year based on her college grade level, she hasn’t nor have they pushed her to do so. Her APR 6.7%.
Oh yeah, when I get the Chase one paid off it’s going too.
H. Luiz Reply:
February 22nd, 2010 at 10:28 pm
@ev, Thanks EV! My BIG BALANCE is on CHASE – soon as that’s paid – OUT it goes (I’m actually thinking about transfering the balance, but I hear that it wrecks havoc on your credit report.)
I am so glad that my son will not be able to get a card in College this year (he’s a senior in HS now.)
ev Reply:
February 22nd, 2010 at 10:40 pm
@H. Luiz, I haven’t had a problem with transferring balances over to the USAA card. When I get it down enough I will most likely do the same with the Chase one. Even with the small percentage rate they charge, it’s still cheaper than paying their interest.
I didn’t mind Heather getting one- she’s almost 25 now, and she was smart to keep the balance low- they had approved her for 1500. She’s used it a few times, but paid it right off. She’s keeping the balance clear for her thesis next year and will probably go for the increase then if she needs it. I liked that they didn’t push the balance and had no problem going with the smaller one. The first year was interest free, so she used a little.
H. Luiz Reply:
February 22nd, 2010 at 11:07 pm
@ev, I get offers for like 3% to transfer my balance from the CHASE card. It went from 7.2% to like 16% in a span of 4 months.
Another mistake is to pay hundreds more than the minimum because most cards now will reduce your limit (according to Suze Ormon.) She suggests paying only like $20-$30 more than the minimum until the economy picks up again…which it IS picking up.
But stupid me, I paid about $400 more than my minimum 5 months ago and sure enough, they lower my limit.
Now, with new CARD Act in place, all these changes will benefit the consumer – finally!
If only you would marry me, I need that USAA card. jajajaja
ev Reply:
February 23rd, 2010 at 6:23 am
@H. Luiz, I’m not sure how my husband would feel about that. I pay above the minimum (which on my usaa one has been 0) and to hell with the balance being lowered. I just want to pay the damn thing off. (the Chase one that is). It’s just not going down fast enough for me though.
H. Luiz Reply:
February 23rd, 2010 at 12:02 pm
@ev, Well, my Partner was not crazy about the idea either, but once I mentioned the reason (USAA Card) he told me to go right ahead and propose. jajajajaja
Now, with the new rules, any extra money beyond the minimum balance will now be automatically applied to your highest “single” purchase balance.
In the past, they would apply extra monies to the entire balance – that’s exactly why it seems to take forever…but not anymore.
Always a pleasure corresponding with you. I have the opportunity to teach/learn so much!
Thank you. It was not clear to me how this new Card Act would benefit me, but after reading your post it’s all clear to me now.
What did we do in the past without you?
New Fan!
H. Luiz Reply:
February 23rd, 2010 at 12:12 pm
@Joshua, What did you do without me? Let’s see…lots! You would have just Google’d it. I just made it a little convenient for you guys.
Thanks for the compliment!
You’re such a know-it-all, but in a good way. You always seem to be helping others all the time!
I do have one question: If I can no longer get a credit card (I’m 19 years old but I’m really a super responsible person) is it fair for the credit card companies to treat me like a child?
I understand that I will need a cosigner now to get a card.
H. Luiz Reply:
February 23rd, 2010 at 12:38 pm
@Bridget, While it is important to “establish” credit (no credit history is just as bad as poor credit history according to credit card issuers), it is something you should not rush into.
Studies show (here I go…) most college students are in debt from credit cards before they graduate (thank goodness credit card companies will no longer be able to swoop down to universities.)
If you are as responsible as you say, your parents will be able to co-sign a card with you (but do you really need “credit” now?) I would suggest for you to wait until you’re at least 21 and try to obtain a card of your own then (even responsible people get into large debt with credit cards and it would not be fair to share that debt with your parents.)
What do you think?
Bridget Reply:
February 23rd, 2010 at 12:47 pm
@H. Luiz, I don’t really need credit now, but I wanted to have a card in case I needed one, like in an emergency.
I asked my dad and my mom and they just laughed at me and told me no. They think that I’m responsible but also said the same thing you said, “Bad Debt happens to Good people.” My dad actually said that if I do have a credit card, how will I pay it back? I’m a fulltime MIT student and they don’t want me working, MIT is really tough. I guess I needed to hear another voice tell me.
Okay, I’ll wait. It is the responsible thing to do.
H. Luiz Reply:
February 23rd, 2010 at 12:57 pm
@Bridget, The Massachusetts Institute of Technology (MIT)??
Go Bridget!!
Girl, not only are you responsible, you’re intelligent! Get your education on and if you can afford NOT to work while attending school, then please – do not worry about credit cards.
Go Parents!!!
ev Reply:
February 23rd, 2010 at 6:46 pm
@H. Luiz, Just remember tho- you can’t have credit and you can’t drink legally, but you can die in uniform.
Ok, from someone former military I shouldn’t say it, but it po’s me so much.
H. Luiz Reply:
February 25th, 2010 at 1:32 pm
@ev, “You aint never tole a lie!”
Don’t get me started on this unjust war. These poor kids can’t get credit now nor drink but they can get blown up for some control of oil.
I’m right there with ya!