Today is the big day! A new law goes into effect which lawmakers say will help consumers from being beat up by banks when it comes to credit card interest rates, penalties and tricky billing cycles. Critics say the law does make some significant changes in consumer protection, there's still pitfalls you should look out for. Galtime Consumer Watchdog Mary Schwager chatted with Adam Levin of Credit.com about what you need to know!
Mary Q: What do you think of the new law and what are top consumer benefits of the new law for consumers?
Adam Levin, Credit.com:
Overall, the Credit CARD Act is going to help cardholders avoid the tricks and traps that have been very costly in the past decade. For example, issuers can’t retroactively hike your rate at any time for any reason. Instead, they must generally give you 45 days advance written notice before changing the terms, and allow you the opportunity to opt out and pay off your balance under the old terms.
It should also be easier to pay your credit card bills on time. Payments must be due the same time each month, and as long as the payment arrives by 5 pm, it will be counted as paid that day. If the due date falls on a holidays or weekends when payments aren’t processed, it will be counted on time if it arrives the next business day.
Other helpful protections:
- Two cycle billing ban. This confusing (and sometimes costly) billing method (a.k.a "double-cycle” billing) is no longer allowed.
- Over-limit fee restrictions: Issuers can’t charge an over-limit fee unless you have given them your permission to authorize purchases that put you over your limit. They also can’t charge an over-the-limit fee if you go over the limit solely due to interest charges or fees.
- Payment fees: Issuers can't charge fees for accepting payment by mail, electronic transfer, telephone authorization, etc. unless the payment involves an expedited service by a service representative.
- Underage cardholders: Anyone under 21 must either demonstrate he or she has the resources to pay back a credit card – or get a cosigner.
Mary Q: Where can banks still "get you" and what should you watch out for?
Adam Levin, Credit.com:
Issuers can still raise your rates for future purchases. In addition, many cards how carry variable interest rates that will rise when interest rates rise. What may seem like a pretty good deal right now may not look so attractive if prime (or whatever index card issuers use) goes up by 5% or more.
While you can opt out of a change in terms, you will have to close your account, which can hurt your credit scores. (How much depends on your overall credit when you close the account. The stronger your credit, the less the impact will likely be.) In addition, your minimum payment may go up if you close your account – though it can’t more than double, and the issuer can’t give you less than five years to pay back your balance.
We also have to keep in mind that card issuers are in business to make money. So they’ll no doubt come up with new ways – or revert to old standbys such as annual feeds – in order to boost the bottom line. Be sure to read your statement each month, as well as the notices your card issuers send in the mail.
Q: Is there anything that consumers need to do?
Adam Levin, Credit.com:
If you receive a change in terms notice, you can follow your card issuer’s instructions for opting out in writing. You may also hear from your card issuers in coming months because they may try to get you to opt in to allowing them to authorize purchases that put you over your limit. If they are successful, they can then charge you an over-limit fee if you do go over your limit.
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