New Law that is changing the Face of Credit Card Policies


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New Law that is changing the Face of Credit Card Policies

Updated: December 25, 2012

The content is accurate at the time of publication and is subject to change.

The use of credit card nowadays has been embraced "tightly" by the American buyers. It is indeed a convenience for most people to just carry a card when purchasing items instead of bringing in cash. Although most consumers subscribe to this trend of buy now pay later theme, not everyone is entirely knowledgeable with the complete understanding of the use of credit cards. Just recently, another set of new accompanying laws that somehow will bring change to the face of credit card use policies will add up to the list that credit card users need to know and understand.

First the federal law is obliging credit card companies to inform their customers about how long it would take to pay off the balance if they only make the minimum monthly pay. Before banks and financial institutes have the liberty to raise their interest rate at anytime moreover they can increase rate on existing balances despite having no late payments recorded in the account. With the new law guiding the credit card policies, the rate could not be raised a year after the account has opened not unless the company`s introductory rate has about to end. Card companies must also inform their card holders 45 days in advance before any change rate has to be implemented. Existing balances, unlike before, cannot be raised anytime. The increase in rate in this matter can only be justified if the account is past due for at least 60 days. Also the new law states that if the payments of an account were made on time for six consecutive months then the original rate must be refurbished.

Another difference the new federal law will bring is a clearer fine print of credit card statements. It is noticeable that fine print on cardholder agreements is hard to understand. Locating the rates, fees and penalties is not an easy task thus card holders find it hard to follow and compute the interest rate and balance in their statements. Now, cardholders will be able to know how many months will it take for them to pay off a balance if they are to pay the minimum payments scheme.

Service fee will also change since banks can charge as much as they wanted before but now, service fee like the annual fee and activation fee "will be capped at 25% of the credit limit on the first year of use."

The grace periods also will be changed with the new federal law. Now it is required that due dates of companies will be constant. Moreover statements must be sent 21 days before the due date of the statement. Other charges and fees cannot be given and applied before the period is up.

These are just some of the changes the new guiding law has brought in the policies concerning credit card use industry that holders must be aware of. Knowing one`s right is the best weapon for consumers to avoid serious threats.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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