The CARD Act has dramatically altered the way credit card lenders can function and intercommunicate with borrowers. Americans have already been receiving all-new credit card bills. As of August 22ND, changes to the first changes of the Credit Card Act will be underway. Here is a look at the bunch of rules that take effect in August and just as importantly: what they could mean to you.
Interest rate increases come with clarification
Credit card companies still can raise your interest rate, but they must tell you why. That control is new this month, although previous rules put limitations on when credit card issuers can raise rates if you pay more than 60 days late. Additionally, some reports indicate that credit card issuers have created less-particular language about when and how much they will raise rates.
Your rate cannot go up within 12 months of opening an account (with certain exceptions). Those exceptions include cards that have a variable interest rate, cards with an initial rate, or accounts where the borrower’s payment is more than 60 days late. If the rate does increase, the bank can only apply the higher rate to the existent balance if the rate went up because you paid late or because a promotional rate expired.
What it means to you: Pay on time to keep your original rate. Watch your statement and any admissions you receive to find out how your credit card issuer handles rate increases. If the explanations seem vague, be sure to contact your issuer for clarification. Also note that many credit card banks use variable interest rates, which will cause the rate to change more frequently.
Banks must re-appraise higher interest rates
The new rules specify that credit card banks that raise customers’ interest rates must re-evaluate those rates after six months. If fitting, the lender must reduce the rate within 45 days after the assessment.
What it means to you: Most likely, this condition will apply to customers who faced a rate increase because of late payments. If you have paid on time for six months after the rate increase, your lender should re-evaluate the rate and might restore the lower rate.
Penalty fees are lower
In the past, penalty fees for late or missed payments or going over the credit limit were about $39. The new law limits late fees to $25. There are exceptions: If you have had another late payment within the past six months, your fee could be as high as $35. Also, your fee cannot be more than your minimum payment. If your minimum payment is only $15 and you pay late, your late fee will be $15 or less.
What it means to you: If you slip up once and pay late, you will add less to your balance than before. The new rules do not mean you can get lazy about paying on time, though. Late payments are still late payments. They damage your credit score, a second late payment will result in more fees, and they indicate that you are having trouble managing credit.
Only one fee can be charged
For any given circumstance, credit card companies can only charge one fee. These rules eradicate practices such as charging a new late fee each day a payment is late.
What it means to you: If you make one mistake, you can breathe easy knowing you won’t have to pay over and over for an error.
For now, these rule changes are the final changes stemming from the Credit CARD Act. As always, your ultimate goal as a consumer should be to use credit responsibly and avert debt. But if you are working to pay off credit card debt, the new rules should make the process fairer for you.
Law disallows inactivity feesIn the past, some credit cards charged customers who did not use an account within a specific period of time. Customers who were paying off a balance might even encounter a fee for not making new purchases. The CARD Act prohibits these fees.
What it means to you: Lenders can still simply close an idle account. If keeping a certain card is important to you (for instance, because it is your only credit card, or because it is an old account with a low balance that helps your credit rating), charge and pay off occasional small purchases to keep the card active.
Okay, so we laid out the new plans for the credit card practises that the banks and credit card companies have been doing to rake in the money, but even with the amendments, they will always have the upper hand. Even with the newer rules in August 22nd, there will always favor the companies. Yes indeed, many steps have been taken, but remember folks, owning a credit card is a privilege and not a right. No matter how much rules are placed, one should always practise good credit card etiquette.
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