New Credit Card Rules Protect Consumers

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The United States Federal Reserve has a new set of rules in place for credit card companies that enables credit card protections for the consumer. Listed below are some key changes that your credit card company must follow that took effect on February 22 and August 22, 2010.


What your credit card company has to tell you?


1) When a credit card company plans to increase the fees or your interest rate, they must send you a notice forty five days before they can:

a) Increase the interest rate on your credit card.
b) Change certain fees (such as fees for cash advances, annual fees, or late fees) that are associated with your account, or
c) Make other significant changes on your credit card terms.


If changes are going to be made on your credit card terms, the credit card company must give you the choice to cancel the credit card before fee increases can take effect. In the event you take the option of canceling your card, the credit card company may close your account and increase your payment that is due every month, subject to some limitations. An example would be that they can require you to pay off your outstanding balance within 5 years, or they can double the percentage of your balance that is used to calculate the minimum payment due on your account every month (which will end up leading to faster repayment than under the terms of your account).

The credit card company doesn't have to send you a notice forty five days in advance if:

a) Your credit card has interest rate that is variable tied to an index; if that particular index increases, the credit card company does not have to provide you with a notice before your rate will increase.
b) Your introductory rate expires and reverts to the former disclosed "go-to" rate.
c) Your interest rate goes up because you are in a workout agreement and you have paid your payments on your account as agreed.

2) Your credit card company must tell you how long it will take to pay off your account balance. Your monthly credit card statement will include information on how long it will take you to pay off your balance if you only make the minimum payments due on your account. It will also tell you how much you would need to pay each month on your account in order to pay off your balance within 3 years.


New rules involving fees, rates and limits


1) Your credit card company can't increase your rate for the 1st year after you open an account. However, there are a few exceptions that apply:

a) If your card has a variable interest rate tied to an index; your rate can increase if the index goes up.
b) If there is an introductory rate, it must be in place for a minimum of 6 months; after this time period your rate can revert to the "go-to" rate the credit card company disclosed when you received the card.
c) Your rate can increase, if you become more than sixty days late on paying your account bill.
d) Your rate can increase, if you are in a workout agreement and you didn't make the agreed upon payments.

2) If your credit card company does raise your interest rate after the 1st twelve months, the new rate will only apply to the new charges you make. If you happen to have a account balance, your old rate of interest will apply to that credit card balance.

3) You must tell your credit card company that you want it to allow transactions that will take you over your credit limit. Otherwise, if a transaction would take your balance over your credit line, it may be turned down. If you do not opt-in to over-the-limit transactions and your credit card company allows one to go through, the will not be able to charge you a fee for going over-the-limit.

a) Your credit card company can apply only a single fee per billing cycle, if you opt-in to allow transactions that take you over your credit line. You can revoke your opt-in at any time.

4) If your credit card company requires you to pay fees (such as a application fee or annual fee), those fees are not allowed to total more than 25% of the initial line of credit. For example, if your initial credit limit is five-hundred dollars, the fees for the first twelve months must not be over one-hundred twenty five dollars. This limit does not apply to penalty fees, such as late payment penalties.

5) If you are under the age of twenty one, you will be required to have a cosigner if you are unable to show proof that you are able to make payments, in order to open a credit card account.

a) If you are under age twenty-one and have a card with a cosigner and want an increase in the credit limit, your cosigner must agree in writing to the increase.

6) Late fees - Your credit card company cannot charge you a fee of more than $25 unless:

a) One of your last six payments was late, in which case your fee may be up to thirty five dollars; or

b) Your credit card company can show that the costs it incurs as a result of late payments justify a higher fee.

In addition, your credit card company cannot charge a late payment fee that is greater than your minimum payment. So, if your minimum payment is $20, your late payment fee can't be more than $20. Similarly, if you exceed your credit limit by $5, you can't be charged an over-the-limit fee of more than $5.

7) No inactivity fees - Your credit card company can't charge you inactivity fees, such as fees for not using your card.

8) One-fee limit - Your credit card company can't charge you more than one fee for a single event or transaction that violates your cardholder agreement. For example, you cannot be charged more than one fee for a single late payment.

9) Explanation of rate increase - If your credit card company increases your card's Annual Percentage Rate (APR), it must tell you why.

10) Re-evaluation of recent rate increases - If your credit card company increases your Annual Percentage Rate, it must re-evaluate that rate increase every six months. If appropriate, it must reduce your rate within 45 days after completing the evaluation.


Changes to payments and billing


1) Standard payment times and dates - Your credit card company must deliver or mail your bill for your credit card at least twenty-one days before your account payment is due. In addition:

a) Your due date, for your credit card bill, must be the same date every month (A example would be, your payment is always due on the 12th or always due on the first day of every month).
b) The payment cut-off time cannot be earlier than 5 P.M. on the date due.
c) If your payment due date is on a holiday or falls on a weekend (when the company does not process payments), you will have until the following business day to pay. (A example would be, if the due date is Sunday the 9th, your payment will be on time if it is received by Monday the 10th before 5 p.m.).

2) If you make more than the minimum balance due on your credit card bill, your credit card company must apply the excess amount to the balance with the highest interest rate. There is an exception:

a) If you made a purchase under a deferred interest plan (for example, "no interest if paid in full by March 2012"), the credit card company may let you choose to apply extra amounts to the deferred interest balance before other balances. Otherwise, for two billing cycles prior to the end of the deferred interest period, the credit card company must apply your entire payment to the deferred interest-rate balance first.

3) Two-cycle (double-cycle) billing are not allowed - Credit card companies can only apply interest charges on balances in the current billing cycle.

For information on protections under the Federal Reserve's other credit card rules please visit their website at http://www.federalreserve.gov

Please Note: Credit cards issued primarily for business or commercial purposes generally are not governed by the consumer protections in the Truth in Lending Act or the amendments to that act in the Credit Card Accountability, Responsibility, and Disclosure Act of 2009.

Although all information is written in good faith and has been reviewed, please email us at help@consumerbadcreditguide.com to report any inaccuracies.