How the Upcoming Legal Changes Will Affect Your Credit Cards
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by: barrywaters
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Huge changes are coming to the credit card industry, and its going to affect your credit cards. Legislation designed to curb common abuses and protect consumers, the Credit CARD Act of 2009, has already gone into effect with relatively small changes, and bigger ones are coming in February 2010. Whats going to change? This is just a few of the ways the terms of American credit cards are going to change:
* Interest rate changes will no longer be retroactive. For example, if your credit rating worsens and your card issuer decides to raise your interest rate, the raise applies only to any new charges you make. The older, lower interest rate still applies to your existing balance. Credit card issuers can raise interest rates on your entire balance only if you are 60 days or more overdue with your payment.
* The credit card company must apply your payments to the parts of your balance with the highest interest rates first. Right now, credit card companies decide which part of your balance they will allow you to pay off first. That means that if you roll over $2,100 to a new credit card at a promotional lifetime rate of 1.99%, then charge $150 to the card at the normal rate of 12%, you will not be able to pay off the $150 until the entire $2,100 at the lower interest rate is paid off first. The $150 sits at the back of the account until then, accruing interest rapidly. The change to the credit card laws will prevent you from paying more in interest for that $150 purchase than you paid for it in the first place.
* You can no longer accidentally run up huge bills by going over your credit limit. Currently, most credit cards will let you go over the limit, but charge a hefty fee for each purchase made over the limit. After February 2010, you will not be able to go over your credit limit unless you have given permission for the credit card company to let you do so, cutting back on the number of nasty surprises in your monthly statements.
* People under the age of 21 will no longer be able to get credit cards without a cosigner unless they can prove that they have sufficient income to repay their debts. Credit card issuers will also not be allowed to send offers for credit cards to people under 21 unless the person has signed up to get credit card offers. Companies that target college students by offering them "gimmes" to sign up for new credit cards will no longer be allowed to offer gimmes on campus.
Even more things are changing, far too many for a signle article to cover. But before the laws changes go into effect, youll see the industry making its own changes: Credit card companies are hurrying to change the terms of your credit cards before the new law makes it difficult for them to make the changes. Be on the lookout for letters announcing rises in interest rates, reductions in the benefits you get from rewards programs, and other changes that will have the long term effect of making credit more espensive. Its the dark side of the efforts to reform the credit industry. But once the wave of unofficial changes is past and the Credit CARD Act of 2009 goes into effect, you may find that your credit cards are safer and more secure than ever.
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Learn more about student credit cards, stop by www.getsmart.com/credit-cards.
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