Sweeping new credit card rules are set to take effect nationwide today. They’re meant to offer fairer terms for everyone who pays with plastic, and could potentially save consumers billions of dollars. Under the new rules, consumers will have added protection from what critics call the “tricks and traps” of credit cards.
“It used to be – let’s say you slip up and you’re a day late on a payment. The credit card companies would triple your interest rate and apply it to your entire, existing balance. That, they can’t do anymore,” Tamara Draut, vice president of policy and programs at Demos, says.
Credit card issuers will not be able to rais your interest rate for 12 months, with one exception. If you are 60 days past due, they will be required to apply payments to the balance with the highest interest rate.
Monthly bills must now show how long it would take you to pay off a balance with only minimum payments. Also, statements will arrive at least 21 days before your payment is due, up from 14 days, to help avoid late fees.
“Here’s the bad news: there’s no limit on how much interest they can charge you, so the sky is still the limit,” Draut says.
Credit card companies can still lower your credit limit at any time, and for any reason, and debit cards are untouched by the new reforms.
“Debit card use is up, as people try to be more careful with their finances, but the banks are catching them from the blind side,” Mike Calhoun, president and COO of the Center for Responsible Lending, says. “They’re putting more fees now on the debit cards.”
Those fees average $35 any time you overdraw your bank account, costing consumers a total of $13 billion each year.
“People need to be responsible, need to pay for the services they get, but they need to pay under fair rules,” Calhoun says.
Consumer advocates are pushing for an independent watchdog agency to regulate the credit and debit card industries. Banks are vehemently opposed to the idea.
Experts urge all consumers to read every statement for upcoming changes and call the bank with questions so you don’t get caught in a credit crunch.
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