WASHINGTON D.C. - The new federal regulations restricting practices of credit card issuers became effective last week, and the result is the reduction of unexpected, punitive surcharges and accelerated payment deadlines.
The Better Business Bureau released a summary this week of those changes, so credit card users can have the tools to better manage their accounts and save their hard-earned money, according to a representative of the organization.
The Better Business Bureau urges cardholders to check their interest rate on unpaid balances for an increase, and look for any reduction in their credit limit, or a notice that their "no annual fee" card now carries an annual charge.
Following are just a few of the new credit card regulations and consumer protections of the federal Credit Card Act:
• Card issuers must give 45 days advance notice before changing cardholder's interest rates. Also, promotional rates must apply for at least six months and, unless disclosed up front, cardholders cannot have their rate increased during the first year they hold the card.
• Cardholder Opt-Out: If there are changes made to the terms of the account, cardholders can choose to reject those changes, close their available credit line and have five years to pay off the balance under the original agreed terms.
• Card issuers are no longer allowed to issue a credit card to anyone under 21 unless they can prove they have the means to repay the debt or if an adult over 21 co-signs on the account. Credit card companies can no longer offer free gifts as enticements on campuses.
• Monthly statements must now be sent out at least 21 days prior to the due date. Also, card issuers can no longer set a payment deadline before 5 p.m. and cannot charge card holders if they pay online, over the phone or by mail. The no-fee phone rule does not apply to phone payments made the day before, day of, or anytime after the regular due date.
• If the card holder has more than one interest rate for different services or accounts with the same lender, any payments over the minimum due must be applied to the account that is incurring the highest interest rate.
• Over the Limit Opt-In: Card holders can no longer assume that charges made over their credit limit will be approved. Card holders must now activate the ability to exceed their credit limit, and subsequently may be charged an over-limit fee by the issuer.
• Card issuers must disclose in bill statements how long it will take cardholders to pay off their bill if they only pay the minimum monthly payment, as well as how much the card holder would need to pay every month to pay off the balance in 36 months.
• When calculating finance charges, card issuers can no longer employ two-cycle billing - a method that causes cardholders to pay interest on previously paid balances.
While the new law is loaded with benefits for consumers, the BBB warns that the new legislation is limited. Credit card card issuers can still raise interest rates on future card purchases and there is no limit on how high those rates can go.
Those who bills on time and in full each month will likely experience a reduction in benefits, the imposition of annual fees, and their credit lines cut.
Business and corporate credit cards are not covered. Many card issuers will likely seek to make up some revenue lost by creating new fees for these cardholders.
To learn more about the new consumer protections, Creditcards.com has details on the new federal Credit Card Act. For information on managing credit cards and debt, visit www.bbb.org.