| Associated Press | The new credit card law is finally here. Starting today, banks will need to abide by new regulations on terms and disclosures. The idea behind the landmark law was to prevent banks from using practices that often dug borrowers deeper into debt.
Here’s a look at how the credit card law affects key aspects of your account |
See also • MarksJarvis: Old tricks end, but new fees sting |
INTEREST RATES
THEN: Banks could raise the interest rate on an account at any time, including the rate on an existing balances, even if you weren’t late on payments.
NOW: The rate cannot be raised in the first year after an account is opened unless an introductory rate has come to an end. After that, cardholders must be notified 45 days in advance of any rate change.
For existing balances, rates can’t be raised unless the account is at least 60 days past due. If payments are made on time for six consecutive months, the original rate must be restored.
There’s still no cap on rates.
DISCLOSURES
THEN: The fine print on cardholder agreements was often difficult to understand. Rates, fees and penalties for other services such as cash advances, for example, could be hard to find. The impact of the interest rate on paying down a balance was hard to compute.
NOW: Cardholders will see how many months it will take to pay off a balance if only minimum payments are made. Statements will also indicate how much needs to be paid each month to pay off a balance within three years.
SERVICE FEES
THEN: Banks could charge as much as they wanted. They could assess annual fees, activation fees and other fees. This was mostly a problem for subprime cards marketed to those with poor credit scores. One popular card, for example, the Premier Bankcard, charged $256 in first-year fees for a $250 credit line.
NOW: Service fees, such as activation and annual fees, will be capped at 25 percent of the credit limit during the first year of use. After that, there is no cap.
GRACE PERIODS
THEN: Some card companies sent out statements not long before payments were due, and sometimes shifted payment due dates from month to month, meaning that payments would not always have enough time to arrive and get processed before being deemed late. As a result, some cardholders ended up getting charged interest or late fees even when they thought they were sending in payments on time.
NOW: The law requires that due dates remain consistent. Statements must be sent out 21 days before the payment due date, and finance charges and fees cannot be applied before that period is up. In practice, about half of card issuers have extended grace periods to as long as 25 days.
OVER-THE-LIMIT FEES
THEN: Banks set credit limits, then routinely allowed charges to exceed those limits. When that happened, though, the customer was charged an over-the-limit fee as high as $39. These fees were often triggered by interest charges or late-payment fees that pushed a balance over the credit limit. What’s more, multiple over-the-limit fees could get charged in a single billing cycle if the balance was paid down and another charge pushed the balance back over the limit.
NOW: The cardholder must specifically agree to permit transactions that exceed the credit limit. Only then can over-the-limit fees be charged. But the fees can’t be triggered by other fees or interest charges. Only one over-the-limit fee may be imposed during a billing cycle. No over-the-limit fees may be charged unless the cardholder has specifically agreed to permit transactions exceeding their authorized credit limit. These fees can no longer be triggered by other fees or interest charges imposed by the card issuer, and only one such fee may be imposed during a billing cycle.
In practice, several of the largest card companies have dropped these fees. Some banks are using pop-up boxes on their Web sites or other methods to obtain consumer authorization.
UNIVERSAL DEFAULT
THEN: If you made a late payment on one credit card or loan, or even late payments for obligations like utility bills, that could trigger interest rate hikes on other credit card accounts.
NOW: Card companies cannot raise interest rates on existing credit card balances. Interest rates can’t rise during the first year an account is open, unless the original agreement spelled out a promotional rate for a limited time.
Consumers with older accounts must be informed of any interest rate increase on new charges at least 45 days in advance. They must also be given a chance to opt out of the hike by canceling the account and paying down the balance at the old interest rate. If an interest rate is increased, the card company must review the account once every six months to assess whether the rate should be dropped.
STUDENTS
THEN: Students arriving on college campuses often confronted a gantlet of credit card marketers handing out T-shirts, pizza and other gifts in exchange for filling out card applications. Credit cards were frequently handed out without checking the applicant’s income sources. In 2008, 84 percent of undergraduates had at least one credit card. Average balances topped $3,100.
NOW: Credit cards may no longer be issued to anyone under age 21, unless the applicant has a co-signer, or can show enough income. Colleges must disclose any marketing deals they make with credit card companies. Banks are not allowed to hand out gifts on or near campuses or at college-related events.
Its about time!! I don’t know why it took so long to place these laws, restricting banks from doing pretty much whatever they want, into effect.
Interest rates….. the damage has already been done. In anticipation of this law passing (an now law), CC companies have already jacked up their interest rate across the board.
[[MAJMark | February 22, 2010 9:13 AM | Interest rates..... the damage has already been done. In anticipation of this law passing (an now law), CC companies have already jacked up their interest rate across the board.]]
which is why you shouldn’t carry revolving debt. yes, my rate on my best card went from 12% to about 19%, but there is no actual cost to me.
I have to laugh…. Every time a story runs like this some high and mighty liar says “I do not carry a balance so the interest rate doesn’t affect me”. LIAR!!! Almost everyone is using their credit now,the economy blows and people refuse to live on less as raises have been frozen and self employed people struggle to survive! Oh yeah….the economy is better? Maybe in Washington or at your local bank,car dealer who got billions,laughable!
BVJI … Exactly! Rate went up? Did impact me, because I don’t carry a balance. I actually only buy what I can afford; novel concept.
These are only the easy to understand aspects of the law, by the way. There are actually a lot more pieces of this legislation. I work for a company that has had to make all sorts of changes to our systems because of the way this thing was written. What killed me was after making a bunch of changes, an 1100 page clarification to the law was sent out that negated the changes we had made. 1100 page CLARIFICATION? Any law that take 1100 pages to clarify is a bad law.
For the most part, the whole thing panders to the lowest common denominator. A group of people didn’t spend responsibly and and can’t or won’t understand how a Credit Card works, so the nanny state gets invovled and tries to protect us from ourselves. Your government at work folks.
Don’t forget to vote in November!
These are all good steps. I do wonder how the very creative people working in the financial services industry will exploit any loophole left to make up for lost revenue. Or, will this be the day in history when American’s finally start to break their addiction to credit? Clearly, these banks were only out to trick consumers. They haven’t changed. Only the tricks will.
Let the credit card companies do what they want. I have one word for them; CASH
[[drew | February 22, 2010 10:17 AM | For the most part, the whole thing panders to the lowest common denominator. A group of people didn't spend responsibly and and can't or won't understand how a Credit Card works, so the nanny state gets invovled and tries to protect us from ourselves. Your government at work folks. Don't forget to vote in November!]]
you’re wrong. the cc companies had a lot of dirty tricks (universal default, double-cycle billing, due dates on a sunday, payment due at 8 in the morning, raising rates on existing balances, applying payments to lowest rate balances), and this law addresses a lot of those issues.
everyone should have zero revolving debt as their goal and this law makes that goal more attainable.
Hey guys… Take a look at your cards…. If you try to use them and pay them off every month like you profess there going to be GONE! This USING of the FREE 30 day float has been identified by the CC companies and all FREE RIDERS are going to the curb! STOP preaching and trying to make yourselfs feel good about “not carring a balance”! It’s a fantasy in your mind and really sounds foolish! I would love to see your credit history,I’d bet 10k cash it would not back up your holier than though back patting! Funny……
I pay in cash 95% of the time and carry a Chase credit card for emergency purposes and any amount I charge is paid in full at the end of the billing cycle. Luckily I haven’t had to use it in almost 8 months. Chase “rewarded” me by reducing my $10,000 limit to $1,000 and raising my interest rate from 8.9% to 13.9%.
Told you that the FREE RIDE was over. If you don’t carry a balance “EVER” you will end up without any credit cards, the companies don’t want you. Here is a better suggestion for the real smart ones like me. I have a business Visa debit/credit card with Chase. I earn enough flier miles every year to fly my family of four to Hawaii first class. This year I paid for an 8 day trips hotel,car rental and first class flight for four and it cost me zero dollars! I only spent $408.00 cash while on vacation! The trick is to use it everywhere you shop and have them run it as credit which only costs them more. The money is debited out of your account(no finance charges) and you get three flier miles for every dollar you spend. Yeah…. I’m a college dropout who knows how to really use the system! P.S My credit line is $75,000 still,sorry guys for your loss of credit line,guess you should think outside the box more often!
To Edward Norton: I am one of those people who carry no credit card debt. I pay with cash or use my debit card. I live within my means. So, please don’t call me a liar. There are people like me who prefer not to have credit card debt.
To janine: GREAT for you…. See you in Hawaii next year? You missed my point,no doubt that 30k a year degree getting in the way of your reason? I have made MILLIONS “using” credit! I have an adjustable mortgage and huge credit lines that are intact because I use them and pay them back EVERYTIME! I will continue to do so! I have been around the world,had every car men dream of and done everthing I ever wanted at 46 years of age all while USING credit! You and the other credit crusaders are afraid of credit because you do not know how to “USE” it! Did you pay cash for your house? Your Car? NOT!!!!!!! Stop being afraid…..live Janine!
Um, newsflash….Credit card companies STILL make money off people that do not carry a balance. Everytime you pay with a credit card, the merchants pay a fee to the cc company.
These changes sound meaningful but they are really not. they are mostly procedural and incremental, For the most part they make it easier to understand the high rates one is charged and let you know in advance that changes are coming. Big Deal.
What would be a REAL change would be to make credit card interest deductible on one’s income tax that same as Mortgage rate interest. CC interest USED to be deductible until changes were made during the 1980’s under RONALD REAGAN. I don’t know if Reagan was responsible for this or if a Democratic Congress forced him to accept this change.
However making it tax deductible would ease the burden on many people. Let’s just assume it was REAGAN stuck the middle class with this burden . that should be an incentive for all you Liberal Reagan haters to push for this change. And for the people who idolize Ron, just assume that a free spending Liberal Congress made him do this because they wanted to tax and spend. Whatever the motivation, making this change would make a difference, unlike the petty rule revisions proposed by the President
I’m not seeing any great innovations in any of this. You could always “opt out”, that’s “cancel” in laymans terms, if you disagreed with something.
Don’t they already put expirations on teaser rates for new cards?
I like the part about those under 21 needing proof of financial ability or a co-signer, but that’s always been an option too. That’s how I got my first card over 30 years ago.
I treat my card like it’s cash and never buy anything I can’t afford. It’s paid off each month. O don’t like owing anyone money. The only reason I carry it is so I don’t have to carry a lot of cash.
What they need to do is make sure ANYONE who applies is financially capable of paying. That’s part of the reason we’re in the mess we are now in this country. Too many people getting credit or loans that they shouldn’t have gotten. There’s a reason people have bad credit or a low score and the rest of us are paying for that.
They need to educate people that this isn’t “free” money. Any one can live life and impress their friends in the fast lane by burying themselves in debt.
This is all fine and swell but what about the billions that these companies have already stolen from the public? Thats like saying to a bank robber, “ok you can keep what you have stolen in the past but from now on we’re going to be tough on you if you steal anything else.” What a joke.
If Edward Norton is such an amazing person, then why is he taking all of his time starting trivial fights with people on this website? Shouldn’t you be in Hawaii or something?
PS I also don’t carry a balance, and I reap all the rewards of my visa card.
Dear MisterCrackers: I am 46 and a college dropout,I’m still in my pj’s at home at 12:05… I work nine months a year doing what I want… I have NEVER been a coporate slave and owned my own businesses since I was 19. YOUR 30k a year degree blinds you as well from my point! STOP being sheep and following everyone else and “be not afraid of using credit”,yes even if you pay interest! FYI, I use the web to keep up with news and read these blogs and am tired of hearing weak people making comments about issues that could be solved by my 9 year old. Sorry….maybe my 168IQ drives me to confront morons! Your right about my time,I don’t have anymore time to train sheep! bahbahhhhhh…
Dear Mr. Norton:
I never once said, nor have I implied, that I have a college degree. Furthermore, this is the third time that you’ve brought up someone having a “30k” college degree. It would seem to me that someone is bitter about being 46 and uneducated.
No Regards,
Mr. Crackers
Actually Edward Norton, it’s not the bank that pays more when you use your Debit Card as a Credit. It’s the Merchant who you are buying from that pays more. There’s this little thing called Interchange, that only applies to Credit Transactions; not to PIN based Debit. So by doing that, you’re not screwing the bank, as you are hoping to do. You’re screwing the merchant who you are buying from. And how are they going to make up that extra fee? Raising their prices.
I hate WalMart with a passion. But they were the only retailer big enough to force Visa/Mastercard to let merchants know what the BIN Ranges were for Debit Cards so they could prompt the customer for the PIN, as opposed to leaving it up to the customer. Sure, you can choose to still run it as a Credit transaction, as you do, and that’s fine. But the Retailer will now be paying an extra percantage to .. you guessed it, Visa/Mastercard.
The reason you get all that free stuff from them? Because they charge the Retailer more for the type of transaction that you are doing.
On behalf of all the retails out there, Thank You for making me pay more in fees so that you an go to Hawaii.
Congress gave the credit card companies MORE than ample warning and time to change their terms BEFORE this law took effect.
I got my rate increase notice (along with other changes in terms) last week. Must be a coincidence – can’t be related to today’s new laws.
We used to have usury laws, now we have MasterCard and VISA.
This is only the beginning. Wait till Congress starts taxing flier miles and all the other perks that customers receive for free. Then we will see how happy everyone is. Everyone with good credit should send their cards back to the credit card companies. I beleive after a few months of people with good credit not using credit cards the credit card companies will beg them to come back.
Im going to sign for a title loan, is a decent interest rate between 10 – 15% ??