New credit card rules went into effect earlier this week. Many of these rules will positively impact consumers; some might have a less positive impact down the line. Heres a quick summary of the key provisions you should be aware of, as well as some links to more detailed information about the new rules.
* You must have 45 days notice whenever your credit card company plans to increase your rates, fees, or make other major changes to your account. You also have the right to cancel the card before any of these fees go into effect (but there may be penalties to do so, which you need to find out about prior to cancelling).
* The 45 days notice of major changes does have exceptions. Exceptions can include: if you have a variable rate tied to an index on your card; if your introductory rate has expired; if you havent made your payments on time.
* Future monthly bills must include information about how long it would take you to pay off your balance when you only make minimum payments. The bills must also give you a calculation of what your payment needs to be if you are to pay off your current balance in three years.
* Credit card companies cannot increase your rate during in the first 12 months after you open your account (unless, again, you have a variable rate, an introductory rate, if you are more than 60 days late in paying.) And if your rate does go up, the higher rate can apply only to new balances on your card and they cant raise rates for 60 days.
* If you want to charge over your credit limit, you must opt-in and you can opt-out at any tie.
* If you have fees on your card, they cant be higher than 25% of your initial credit limit.
* Your rates cannot be increased if the credit card company was late in crediting your payment.
* If you make more than the minimum payment, the extra amount paid must be applied to higher-rate balances on your account.
* Credit card companies must send you your bill 21 days before your payment is due and your due date should be the same day each month.
* No more universal default. In other words, if you are late on one card, companies cant raise your rates on other accounts.
* Gift cards must keep their full balance for five years.
* Cards may not be issued to anyone under the age of 21 without a co-signer or proof of ability to pay.
While these are certainly great protections for the consumer, keep in mind that there is no free lunch and that ulitmately consumers will pay a price for the new protections. This might include:
* More difficulty in getting approved for credit.
* Higher merchant fees, which ultimately get passed down to the consumer via higher prices in stores.
* Additional fees when you opt in for over credit limits.
* Cut backs on reward points with cards.
* Possibly higher rates for late payers.
For more information about the new credit card rules, go to the Federal Reserves site which provides a detailed explanation about how the new rules will affect you.
* You must have 45 days notice whenever your credit card company plans to increase your rates, fees, or make other major changes to your account. You also have the right to cancel the card before any of these fees go into effect (but there may be penalties to do so, which you need to find out about prior to cancelling).
* The 45 days notice of major changes does have exceptions. Exceptions can include: if you have a variable rate tied to an index on your card; if your introductory rate has expired; if you havent made your payments on time.
* Future monthly bills must include information about how long it would take you to pay off your balance when you only make minimum payments. The bills must also give you a calculation of what your payment needs to be if you are to pay off your current balance in three years.
* Credit card companies cannot increase your rate during in the first 12 months after you open your account (unless, again, you have a variable rate, an introductory rate, if you are more than 60 days late in paying.) And if your rate does go up, the higher rate can apply only to new balances on your card and they cant raise rates for 60 days.
* If you want to charge over your credit limit, you must opt-in and you can opt-out at any tie.
* If you have fees on your card, they cant be higher than 25% of your initial credit limit.
* Your rates cannot be increased if the credit card company was late in crediting your payment.
* If you make more than the minimum payment, the extra amount paid must be applied to higher-rate balances on your account.
* Credit card companies must send you your bill 21 days before your payment is due and your due date should be the same day each month.
* No more universal default. In other words, if you are late on one card, companies cant raise your rates on other accounts.
* Gift cards must keep their full balance for five years.
* Cards may not be issued to anyone under the age of 21 without a co-signer or proof of ability to pay.
While these are certainly great protections for the consumer, keep in mind that there is no free lunch and that ulitmately consumers will pay a price for the new protections. This might include:
* More difficulty in getting approved for credit.
* Higher merchant fees, which ultimately get passed down to the consumer via higher prices in stores.
* Additional fees when you opt in for over credit limits.
* Cut backs on reward points with cards.
* Possibly higher rates for late payers.
For more information about the new credit card rules, go to the Federal Reserves site which provides a detailed explanation about how the new rules will affect you.