New Credit Card Rules

January 28, 2010 12:45:21 PM PST
The Federal Reserve recently issued sweeping new rules to better protect Americans with credit cards. And with the majority of the Act's remaining provisions scheduled to take effect on February 22, 2010, it is more important than ever for consumers to realize that while the changes were designed to save card-holding consumers money, many hidden and emerging fee traps remain intact. Joan Jensen, president and CEO of The Central Credit Union of Illinois shares the following information to help us look beyond the headlines to gain a better understanding into which of the changes may not help as touted, rather, could possibly up costing uninformed consumers even more in the long run.

Rate Increases Are Reined In: Under the new rules, rate increases can be made on new balances with a 45-day notice. However, rates on existing credit card balances cannot be changed except under special conditions.

  • Rates on variable rate accounts can change as the index changes (Prime rate or Libor) using the formula that was disclosed to the cardholder. Formula changes increasing the rate can be made only on new balances and not existing balances.
  • If a cardholder is 60 days or more late in making payments, the rate may be raised. The lower rate must be restored following six consecutive months of on-time payments.
  • Rates may be raised on new balances with a 45-day notice if cardholder is past due with other creditors (otherwise known as the universal default rule.)
  • Special promotional rates must last for at least six months before rates can be raised.
  • The rate structure cannot be changed on a new card for the first 12 months.
  • Beware of Fees: Some credit industry insiders believe the new law could end up making credit cards more costly as card issuers seek out new revenue streams.

    • Over Limit Fees cannot be charged unless the cardholder "opts in" to having an overlimit fee charged when the account balance is over the credit limit. There are also limits on how often the fee can be charged.
    • Late fees and NSF fees could increase.
    • Annual Fees could reemerge as a standard practice.
    • Student Credit Cards:

      • Most new accounts opened for card holders under 21 will need a qualified co-signer with sufficient income to pay any credit card charges.
      • Marketing of cards to students will also have new limitations.
      • Credit Card Statements Will Have a Make-over:

        • They must tell you when your payment must be received to avoid a late fee.
        • They will state how long it will take to pay off your balance if you make only minimum payments. It will also give the amount you must pay if you want to pay off the balance in three years.
        • There will also be a toll free number for credit counseling.