With the new rules in place customers can expect to be treated fairly as credit card companies will be more transparent with the charges that are levied.
Starting this month the way the providers charge the borrowers will undergo a complete change following a government rule. Firms will now have to charge a “positive order of repayments” wherein the debts which carry the highest rates will have to be paid off first. As of now the common practice was to use the monthly payments made by the customer to pay off the debts that were the cheapest and leaving the more expensive debts to accrue interest.
Now the card issuers will have to give a 60-day notice, in case there is an increase in the rate of interest. Card holders in turn will have the option to either stop using the card, or reject the hike in interest but can pay off the debts at the present rates.
These changes will bring about a sense of confidence with the card holders as they will have better control over the usage of their card, and this will give the nation`s 30 million card holders a welcome break.
However, these changes will cost card companies another 600 million per year and the concern is that providers will certainly try to recover these costs. Although the new set of regulations will bring about some cheers to the customers, it will impact the profits of the issuers in a negative manner. This could in turn lead to a new set of fees, as well as higher interest rates.
Now borrowers are being warned that the minimum payment they make on their cards could eventually prove costly in the long run, in spite of the new rules that are designed to help them pay off their debts much faster.
As per the new rules in place, starting from March, even the minimum payment which customers make will cover the interest, charges, fees, and 1% of the outstanding balance in order to reduce the original debt gradually.
If the borrower continues to pay only the minimum payment, then the provider will have to inform them that it will cost more in the long run. The main signs of having a debt issue are just paying the minimum every month. Borrowers should also keep their issuers informed about their financial position and stay away from trouble.