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Understanding the new credit card reforms
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On May 22, 2009, President Obama signed credit card reforms into law, and they will begin to benefit consumers come February. The Credit Card Accountability, Responsibility and Disclosure Act prohibits some deceptive tactics that credit card companies have been using for years, and since close to half of all Americans carry an average balance on their cards of more than $7,000, (average household credit card debt in Los Angeles $8,815), this is going to positively impact many people.
What exactly has changed?
- Statements will be required to tell the card holders how long it would take to pay off the balance, if it were solely paid off using minimum monthly payments.
- Companies will have to mail out the statement 21 days before it’s due, as opposed to the previous 14 days.
- Changes to terms and conditions will require at least 45 days notice
- Rate increases will be prohibited on existing balances unless consumers are at least 60 days late paying their bill, or the initial rate was a promotional rate that has expired, and this scenario would still be required the 45 day notice as shown above.
- Promotional rates must be valid for 6 months.
- Payment processing fees, such as surcharges for paying by telephone, will be banned.
- Your credit card company can’t punish you for being late paying another card company.
- Payments will be applied toward the portion of your balance with the highest rate; this in my opinion is among the most revolutionary of changes in this legislation.
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