Have you ever had to pay a late fee on your credit card? Has your interest rate increased, without you knowing about it? Do you know how long it will take for you to pay your credit card balance off, if you only make the minimum payment?
Over the last 2 years the Federal Reserve Board has been implementing some new rules to help protect American consumers from “harmful practices” with their credit cards. The new credit card rules will help you answer some of these questions, and help you take better control of your credit card accounts.
The new rules started in February of 2010 and the last reforms will be effective August 22, 2010. Here’s a quick recap of all the most important credit card changes.
Your credit card company is required to inform you when they plan to increase your rate or other fees. You should receive a 45-day notice before an increase in your interest rate or a change in fees (annual fees, late fees and cash advance fees).
Your credit card company is required to inform you if there are going to be changes to the terms of your credit card. Your credit card company must offer the option to cancel a card before new fees take effect.
Your credit card company cannot increase your rate for the first 12 months after you open an account. Big asterisk on this one though, exceptions as listed by the Federal Reserve, include:
- If your card has a variable interest rate tied to an index; your rate can go up whenever the index goes up.
- If there is an introductory rate, it must be in place for at least 6 months; after that your rate can revert to the “go-to” rate the company disclosed when you got the card.
- If you are more than 60 days late in paying your bill, your rate can go up.
- If you are in a workout agreement and you don’t make your payments as agreed, your rate can go up.
Restrictions on over-the-limit transactions. You must tell your credit card company that you want it to allow transactions that will take you over your credit limit. Otherwise, if a transaction would take you over your limit, it may be turned down. If you do not opt-in to over-the-limit transactions and your credit card company allows one to go through, it cannot charge you an over-the-limit fee.
- If you opt-in to allowing transactions that take you over your credit limit, your credit card company can impose only one fee per billing cycle. You can revoke your opt-in at any time.
Your credit card company must mail or deliver your credit card bill at least 21 days before your payment is due. Standardization for payments also includes a due date at the same date each month. If your due date falls on a bank holiday or weekend one month, you have until the next business day to pay before a payment is considered late.
No two-cycle (double-cycle) billing. Credit card companies can only impose interest charges on balances in the current billing cycle.
Your credit card bill must include how long it will take to pay off your balance making the minimum payments.
Anyone under 21 will not qualify for a credit card without a co-signer, unless they prove they have adequate income to make bill payments. “Adequate income” has not been fully defined so most under 21 should assume they will need a cosigner, and if they want to up their credit limit they’ll need written approval from said cosigner. Additionally, according to the New York Times, credit card companies can no longer market their cards on college campuses.
As of August 22, your credit card provider may only charge “reasonable” penalty fees. You cannot be charged for a late payment fee of more than $25, unless one of your last six payments was late, in which case your fee may be up to $35; or the costs incurred as a result of late payments justify a higher fee. Other reasonable penalty protections include:
You cannot be charged a late payment fee that is greater than your minimum payment. For example, if your minimum payment is $20, your late payment fee cannot be more than $20.
You cannot be charged more than one fee for a single event or transaction.
Inactivity fees are no longer allowed. As of August 22, you cannot be charged a penalty for lack of use on a credit card.
If your Annual Percentage Rate (APR) is raised, your credit card company must tell you why and then re-evaluate the new rate every six months. If the evaluation shows that the raise is not longer warranted, your credit card company is required to reduce your rate within 45 days.
Increased rates apply only to new charges. If your credit card company does raise your interest rate after the first year, the new rate will apply only to new charges you make. If you have a balance, your old interest rate will apply to that balance.
The changes do not apply to traditional corporate cards. The new rules are meant to protect consumers.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.