Sweeping new laws to govern the credit card industry, making cards easier to understand for consumers!
Its official President Obama has signed a federal law to protect millions of consumers from credit card company abuse; we are in a new era for managing credit. This new law contains the most far-reaching changes we have seen in the credit card industry in decades.
But what does it actually mean for you, the card holders?
There will be a new “normal” with credit cards becoming more transparent, easier to understand, slightly more expensive for most and less accessible for low-income families. Experts also believe we could see a return of routine annual fees, less rewards cards and many bills being due immediately without the traditional month long grace period.
For millions of credit card users it means avoiding retroactive interest rate increases on existing card balances, more advanced notice of account changes and fewer penalties, late fees and high interest payments.
The method of advertising/enticing new users has been tightened up as well…good for all new credit card seekers!
Here are some highlights:
1. There will be limits to the amount of interest rate hikes on all credit cards, such as when a promotional rate ends, a card has a variable rate or if someone pays an account late. Interest rates on new transactions can only be increased after the first year. Any “significant” changes to an account cannot occur without a 45 day advance notice to the consumer.
Universal default, the practice of raising interest rates on customers based on their payment records with other unrelated credit issuers (utility companies and other creditors) will no longer be allowed.
2. Consumers will have more time to pay their credit card bills. Card issuers are required to give account holders a “reasonable” amount of time to make payments on their accounts. What that means for you is a minimum of 21 days to make a payment. Card issuers can no longer set early morning or other arbitrary deadlines for payments. Any deadline set before 5pm on the payment due date will be illegal under the new law. Payments due at those times, on weekends, holidays or when the card issuer is closed for business will no longer be subject to late fees.
3. Your highest paid balances will always be paid first when you make a payment greater than your minimum required payment. Current industry practice has always been to apply all amounts over the minimum payment to the lowest interest balances first, thus extending the time it will take you to pay your account off.
4. No more automatic over-the-limit fees on accounts. All consumers must “opt in” to the card issuers’ over-the-limit services. Those who opt out will have their transactions rejected if they attempt to exceed their credit limits. Also the law mandates that any fees charged for going over the limit must be reasonable.
5. Now for the one that we found most interesting. Card issuers must now disclose to consumers the consequences of making only the minimum payment required on their monthly statements, namely how long it will take them to pay off their entire balance if they make only the minimum payment each month…years to payoff is a real “shocker” to most consumers. Issuers must also provide information to the consumer outlining how much the consumer must pay in order to pay off their balances within 12, 24 or 36 months, including all interest and annual fees on their account.
For more information, or if you find yourself drowning in debt, please contact AmeriFree to discuss how our Debt Management Plans (Credit Counseling & Debt Settlement) may be able to help reduce your payment and eliminate stress from your life!
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