Credit Card Reform 2009-2010

Uncovering the Past

Credit card companies are businesses. They are trying to make money for providing a service. In the earliest of times, everything was fair and you paid your interest as a fee for the service they provided: helping you buy large ticket items without cash. Unfortunately times have changed, and while not all companies are in it for the money, many of credit card policies seem to be designed to take as much from you as possible. Unexpected and unexplained fees and rate changes can ruin your financial portfolio, and for some people it has caused stress and even bankruptcy. Exposing these practices, though, the New Credit Card Reform 2009-2010 laws aim to help borrowers be more responsible and manage their credit with ease.

A. Fair Notice

While these new policies cannot necessarily stop credit card companies from charging you some of their sometimes astronomical fees, they do regulate how you are notified. Now credit card companies must give you at least 45 days of notice before changing your rate, unless you have a variable rate card, in which case you should already be aware of when it changes. In the past, if you missed a single payment, the lender could alter your rate immediately, which would raise your payment by the next billing cycle which could throw off your budget. Now, no matter what the reason is, they must give you this notice so that you can prepare for the adjustment.

Unfortunately, these changes are not just affected by your payment history with the credit card company. Universal default says that they can alter your rate based your payment history with any creditor. Basically, if you are late on your car payment, there is a higher risk of you also being late with your credit card payment, which is reason enough for a rate change. Again, these new laws cannot necessarily guarantee that this will not happen to you, but it will give you 45 days notice to make arrangements.

B. Fair Charges

With the subprime mortgage crisis of recent past, you might think that those worries are over, but there also exists a subprime credit situation too. If you open a credit card account with a starting fee, this might be because find you as a liability, based on your credit history or credit score. The subprime market is designed to help people with less-than-perfect get access to modified credit accounts, which is supposed to support economic growth. Unfortunately, this used to come with high penalties and charges, but the credit card reform laws do not allow it. Now, credit card companies cannot charge you more than 25% of your available limit within the first year. Keep in mind that the new law cannot prohibit them from finding other ways to charge these fees, but for now this part of it is cut-and-dry.

Also, you will find that there are no more over-the-limit fees or NSF fees. The new provisions prohibit companies from charging you for going over the limit from finance charges, unless you allow it in your contract. Companies can set up arrangements with their clients as they see fit, and it will be up to you to educate yourself on how each option will work to your benefit or detriment.

C. Fair Practices

Credit cards carry different rates for balance transfers, new purchases, and cash advances. What you probably don't know is that your minimum monthly payment goes towards paying the balances with the lowest-interest rate first. This keeps your high-rate balances upon and accruing massive interest as long as possible. The new laws force lenders to use your payments to pay down your high-interest balances first.

Finally, credit card companies are now required to supply you information that will help you reduce your credit liability. When you set up a payment plan, they must provide to you an estimated date of payoff according to the minimum balance. They must also inform you of certain changes that you could make that will hurt your credit standing.

New Credit Card Rules - February 22, 2010

The Federal Reserve's new rules for credit card companies mean new credit card protections for you. Here are some key changes you should expect from your credit card company beginning on February 22, 2010:

1. What your credit card company has to tell you?

  • When they plan to increase your rate or other fees.
  • How long it will take to pay off your balance.

2. New rules regarding rates, fees, and limits

  • No interest rate increases for the first year.
  • Protections for underage consumers.
  • Increased rates apply only to new charges.
  • Caps on high-fee cards.
  • Restrictions on over-the-limit transactions.

3. Changes to billing and payments

  • No two-cycle (double-cycle) billing.
  • Payments directed to highest interest balances first.
  • Standard payment dates and times.

New Credit Card Rules - August 22, 2010

More new rules from the Federal Reserve mean more new credit card protections for you. Here are some key changes you should expect from your credit card company beginning on August 22, 2010:

1. Additional fee protections

  • No inactivity fees.
  • One-fee limit.

2. Re-evaluation of recent rate increases

Now: If your credit card company increases your APR, it must re-evaluate that rate increase every six months. If appropriate, it must reduce your rate within 45 days after completing the evaluation.

3. Explanation of rate increase

Now: If your credit card company increases your card's Annual Percentage Rate (APR), it must tell you why.

4. Reasonable penalty fees

Now: Your credit card company cannot charge you a fee of more than $25 unless:

  • Your credit card company can show that the costs it incurs as a result of late payments justify a higher fee; or
  • One of your last six payments was late, in which case your fee may be up to $35.

New Credit Card Rules Documentation