If you’ve got plastic in your wallet, you’ll want to get hip to the new credit card laws that went into effect in 2010. Here are some key changes to credit cards that could help you manage your debt more effectively:
- Providing Clearer Due Dates
Old news: Ever notice your due date change on your bill? Credit card companies could change the date for reasons unknown, causing you to make your payments late.
New deal: Under the new law, your due date won’t change. Credit card issuers (banks) can’t randomly change the due date and cut-off time to receive your payment. Cut-off times set before 5 p.m. on the payment due dates would be illegal under the new credit card law. Payments due on weekends, holidays or when the card issuer is closed for business will not be subject to late fees. Credit card issuers must send bills at least 21 days before the due date.
- Limiting Over-the-Limit Fees.
Old news: In the past, if your credit card limit was, for example, $500, but you charged too much and went over the limit by $25 to total $525, you were punished with a fee of as much as $39 on your next bill.
New deal: Now, consumers must "opt in" or give banks the OK to charge over-limit fees. If you opt out, the bank will reject your transaction at the register if your purchase will cause you to go over your credit limit. This eliminates those fees, and also forces you to monitor how much credit you use. In addition, fees charged for going over the limit must be reasonable.
- Making Minimum Payments
Old news: You might not know that just paying the minimum payment suggested by the bank could keep you in debt longer. And you will be making banks more money on the interest you’re paying.
New deal: Now, credit card issuers must tell you on your bill the consequences of making only minimum payments each month, and how long it would take to pay off the entire balance. They will also provide information on how much you should pay each month to pay off your balances in 36 months, including how much of that amount is interest.
- Increasing Your Interest Rate
Old news: If you don’t look at your monthly bill with a close eye, you may not notice that your interest rate changes, and often goes up, not down. The higher it is, the more you pay, the more the banks earn.
New deal: The truth is, the banks can still hike up your interest rate, but now they have to tell you 45 days in advance. Interest rate hikes on your current balance would be allowed only under limited conditions, such as when a promotional rate ends, there is a variable rate or if the cardholder makes a late payment. (This part of the law actually went into effect last August, but it’s a friendly reminder.)
- Payments Working in Your Favor
Old news: If you’re someone who uses credit cards to make purchases, get cash advances or transfer balances from other credit cards, chances are your bank charges you a different interest rate for each action. When you make more than a minimum payment, the extra would go to the low-interest rate items, which lengthens the time it takes you to pay off your balance.
New deal: Now, if you pay $40 instead of the $30 minimum payment, the bank must put the extra $10 toward your highest interest items first.
The new credit card reform law includes many changes we haven’t listed here. (For example, banks are no longer allowed to give
credit cards to anyone under the age of 21.) Some of these changes work for you, while others work against you.
For your best protection:
- Always pay your bills on time each month
- Pay more than the minimum
- Keep your balances as low as possible, pay them off completely if you can.
- If you owe more than $15,000 and you need help managing your debt, get help from organizations such as Consumer Credit Counseling Services.