Monday February 22 2010
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Our thanks to consumer advocate Clark Howard
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As of today, the new kredit card rules have been almost completely implemented. There is a third and final phase of the roll-out later this year that you’ll be hearing more about. But this is the biggie we’ve all been waiting for.
The nation’s five largest credit card issuers — American Express, Bank of America, Capital One, Citibank and Chase — have been dreading this day because now they have to honest!
It used to be that the credit card companies would play a con game by sending you a glossy brochure and pages of mice type that explained how they’d rip you relentlessly. Some call this a “triumph of capitalism,” as they maintain that the nation’s banks did more to undermine capitalism than Karl Marx ever did because they continually undermined people’s faith in the system.
The new credit card rules have changes that are very favorable if you choose to act on them.
• Your next credit card statement will clearly disclose how long you’ll be in debt if only making minimum payments. A reporter for The Financial Times of London crunched some numbers and found that the typical American with an average balance and interest rate making only minimum payments won’t be out of debt until 2058! And that’s never charging another penny again to that card!
• If you have multiple interest rates on your account, anything you pay over the minimum balance will be applied to the highest rate first. But beware, if you only pay the minimum, the money will still be applied to the lowest balance first.
• Banks must give 45 days notice before raising the interest rate on future purchases. Use this as a chance to leapfrog to get a new card elsewhere. Notify your issuer that you’re rejecting their new terms. You’ll won’t be able to make any new charges, but you’ll get to pay off your balance under the old agreement.
• Your interest rate on existing balances can’t be raised until you’re in default for 60 days.
• Any annual fees must be capped at 25 percent of your card’s limit.
• Teaser rates on new cards must be honored for one year.
• Two-cycle billing will no longer be allowed. This was a sneaky way that banks would charge massive interest if one month you paid in full and the next month you didn’t.
• Adults under age 21 will need parental consent to get a new credit card. The sole exception is for legally emancipated minors.
• Bills must mail to you no later than 21 days before the due date.
• The new daily cutoff for a lender to receive payments via the mail is 5 p.m.
• It will be illegal for a bank to let a transaction run when they know you’ll go over your limit — unless you give them written permission to do so.
• Sellers of debit gift cards must clearly disclose the rip-off fees that are passed on to the user. Such cards will now have a 5-year lifespan.
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BeFree suggests that we all pay off our kredit cards ASAP