Immediately after presiding over, President Barack Obama signed the new provisions under the Credit Card Act on May 22, 2009. And with these new credit card laws coming into effect from Feb. 22, 2010; some of the most dramatic changes are expected. The credit terms, fees and interest rates are believed to have been changed significantly. New credit card laws, as expected, will bring in more transparency with easier-to-understand terms albeit at a higher initial cost. This is sure to make the credit card inaccessible to low-income families or those with a bad credit score.
Let’s discuss some of the provisions of the new credit card laws and what they mean to you and me.
Regulated Interest Rate hikes: This holds good promises. The new laws inhibit the improper pattern of interest rate hikes. The rate changes can be considered only under certain conditions such as in case of a variable rate, ending of a promotional rate period or if a cardholder delays payment. Then also, a 45 day notice has to be served before any changes can take effect.
Opting-Out Right: The cardholder now have a right to reject (opt-out) certain changes made to their accounts. This means consumers agree that their accounts be closed and they have to pay the remaining balance under previous terms. The new credit card laws provide cardholder with a period of five years to do the same.
Regulated Laws for Young Adults: New credit card laws require that credit issuers cannot issue a card to anyone under 21 years of age, unless any adult co-signers signs on the account or prove that they have sufficient income. There is also a 1000 feet restriction to set up a credit company office near a college campus.
Relaxation in Monthly Payment Time: According to the new credit card laws, the cardholders have minimum 21 days to pay, after they have being mailed or delivered. This is one of the key amendments being made in the new credit card laws and is applauded by many.
Pay higher interest rate Balance first: If you have a card offering differential rate interests, you now have the option to pay payments which carry higher interest rates. Currently, you have to pay all the amounts in minimum monthly payments, beginning with the lowest-interest payment first. This old practice extends the pay-off time for higher interest balance and thereby costing you dear. The new credit card laws abolish this system.
Special Sub-Prime Credit Cards: New credit card laws provide some relief to those having bad credit history. Those with a Sub-Prime credit card have lower account-opening fees. This initial fee should not be more than 25% of available credit for the first year.
These are the important new credit card laws. But they do not cover everything and there are still some loopholes. Card issuers can still change the interest rates according to the increase in prime rate. Credit companies can still close accounts and trim credit limits suddenly, without any warning to the cardholders. This will mean that the credit card debt help services will keep on mushrooming because there will still be people who wish to get out of credit card debt. Nonetheless, the new credit card laws do radicalize the decade old system.
