As you may have by now that the credit card act was enforced earlier this year in February 22, 2010. This tightens the reigns of many unfair practises that the credit card industry has gotten away with for many years. Since the start and the popularity of credit cards, people have become more and more reliant on them for purchases. Now as our society becomes heavily based on one’s credit, people have become accustomed to using their plastic cards to make ends meet at the end of the month. Deeper and deeper credit card debt is getting for folks and up until early this year, credit card companies have literally raped their customers with many unfair practises, such as skyrocketing interest rates and ridiculous fees.
What kinds of changes are going to changed in August 2010, you ask? Well quite a few changes indeed. Like any good post, we will make headers for each with a brief explanation along with further reading material found in earlier posts within our site. It’s really worth the read if you want some more clarity.
More Time Given
Under the credit card law, credit card companies have to give card account holders “a reasonable amount of time” to make payments on monthly bills. That means payments are due at least 21 days after they are mailed or delivered. Consumers have complained about due dates that change without notice or are moved up, giving them less time to pay their bills and increasing the likelihood of late fees.
Minimum Payments
Credit card issuers must disclose to cardholders the consequences of making only minimum payments each month, namely how long it would take to pay off the entire balance if users only made the minimum monthly payment. Issuers must also provide information on how much users must pay each month if they want to pay off their balances in 36 months, including the amount of interest.
Limiting Interest Rate Hikes
Interest rate hikes on existent balances are 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. Interest rates on new proceedings can gain only after the first year. Significant changes in ground on accounts cannot occur without 45 days’ advance notice of the change.
Say Good Bye To Double-Cycle Billing
Finance charges on outstanding credit card balances must now be computed founded on purchases made in the current cycle rather than going back to the previous billing cycle to calculate interest charges. So-called two-cycle or double-cycle billing hurts consumers who pay off their balances, because they are hit with finance charges from the previous cycle even though they have paid the bill in full.
Limited Universal Default
“Universal default,” the exercising of breeding interest rates on customers based on their payment records with other unrelated credit issuers (such as utility companies and other creditors), has ended for existing credit card balances. Card issuers are still allowed to use universal default on future credit card balances if they give at least 45 days’ advance notice of the change.
Limiting Over-Limit Fees
Consumers must “opt in” to over-limit fees. Those who opt out would have their transactions rejected if they outstrip their credit limits, thus avoiding over-limit fees. Fees charged for going over the limit must be reasonable.
Seeing Clearer
Credit card issuers are no longer able to set early morning or other arbitrary deadlines for payments. Cut-off times set before 5 p.m. on the payment due dates are illegal under the new credit card law. Payments due at those times or on weekends, holidays or when the card issuer is closed for business are not subject to late fees.
Paying Off The Highest Interest Balances First
When consumers have accounts that carry different interest rates for different types of purchases (i.e., cash advances, regular purchases, balance transfers or ATM withdrawals), payments in excess of the minimum amount due must go to balances with higher interest rates first. Common practice in the industry had been to use all amounts over the minimum monthly payments to the lowest-interest balances first — thus extending the time it takes to pay off higher-interest rate balances.
Opting Out Right
Consumers now have the right to opt out of — or reject — certain significant changes in terms on their accounts. Opting out means cardholders agree to close their accounts and pay off the balance under the old terms. They have at least five years to pay the balance.
Got Bad Credit? A Credit Card Option Is Out There
People who get sub-prime credit cards and are charged account-opening fees that eat up their available balances get some relief under the new credit card law. These upfront fees cannot exceed 25 percent of the available credit limit in the first year of the card. rather of charging high upfront fees, some issuers are considering high interest rates on these high credit risk accounts.
Limiting Credit To Young Adults
Credit card issuers are banned from issuing credit cards to anyone under 21, unless they have adult co-signers on the accounts or can show proof they have enough income to repay the card debt. Credit card companies must stay at least 1,000 feet from college campuses if they are offering free pizza or other gifts to entice students to apply for credit cards.
Law Doesn’t Cover Everything
Consumers should take note: Although the reforms are the most dramatic changes in credit card laws in decades, they do not protect card users from everything. Credit card companies can still raise interest rates on future card purchases and there is no cap on how high interest rates can go. Business and corporate credit cards also are not covered by the protections in the CARD Act.
If credit card accounts are based on variable APRs (as the majority now are), interest rates can increase as the prime rate goes up. Credit card companies can also continue to close accounts and slash credit limits abruptly, without giving cardholders advance warning. Many banks are already finding ways around the law and launching new fees not specifically banned by the credit card reform law. Those sneaky critters. Still as we know that banks and the credit industry will always have the upper hand because thay can and they will without remorse!
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It is really very good post, but I do not see everything completely clear, especially for someone not involved in that topic. Anyway very interesting to me.