Beginning Monday, new credit card rules will be implemented to prevent banks from victimizing customers with underhanded schemes for profit.
With the new rules, credit card companies can no longer raise interest rates whenever possible. Before doing so, banks must first give consumers plenty of notice.
The new law, some sectors say, will prevent unfair practices and protect consumers' money.
Starting on February 22, credit card companies must allow 45 days notice to cardholders before hiking interest rates.
These companies must also give consumers more time, at least 21 days, to settle their bills.
Issuers cannot also charge higher interest rates unless the payment is 60 days late.
There have been consumer groups that protest banks' practice of charging late fees if a payment was even just only an hour late. After that, the banks would charge consumers with a higher interest rate, sometimes twice the original rate.
This is one practice considered predatory, and seen as the biggest rip-off. Consumerists have noted that banks have been raking in millions of dollars because of this practice. With the new law, people are now saved from just paying the same amount they owned again and again.
But the biggest drawback is that it would be highly more difficult for people to secure credit cards. And if they do get one, they will get slapped with annual fees.
Analysts have all noted that because credit card companies expect to lose a lot of money with the new restrictions, they are devising new schemes to make up for the lost revenue.
Citigroup will soon charge annual fees to card holders who spend up to $2,400. This is just one of the many strategies banks will take just to recoup lost revenue. Some may even charge new fees, such as customer service fees, processing fees and others that are within the limits of the law.
Also, beginning Monday, credit card statements will show how long card holders can settle their debts if they only pay the minimum balance. Issuers should also give card holders 45 days before interest rates are increased. And, if the borrower is still having difficulty in settling the bills, an advice will be seen in the statement to get a credit counselor. Information on how and where to get their services will also be highlighted.
When you do get a counselor, you have to recognize and understand that this will definitely affect your credit score. Thus, it will be wise to get this counselor only if you really need it.