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Millionaire Money Habits

May 27th, 2009 at 7:01 am

How the New Credit Card Laws Will Affect You

On May 22, 2009, a new credit card law was passed.  The proposed goal is to help protect consumers from unfair credit card practices, some of which you may have been a victim of.  However, it appears that even the people who have always paid their bills on time and in full might be hurt by this new law.

There are definitely some benefits.  Credit card companies cannot raise your interest rates without giving you at least 45 days notice.  Your bill is due 21 days after the date it was mailed, which means your due date cannot be changed in the meantime, and the credit card company cannot mail your bill at the last moment in the hopes that you won’t have enough time to pay by the due date.

There is no more universal default, which means that one creditor cannot raise your interest rates because you’re suddenly late paying a completely different creditor.  There is also no more double-billing cycle, so finance charges on late payments will be based on your current purchases rather than reaching back to previous bills.  The credit card companies also cannot enact any penalty interest rates until you’re 60 days past due, so you have a little extra time.

You can also “opt out” of fees for going over your limit.  That’s not to say you get a free ride when you go over your limit.  It’s more that your purchase will be denied if it will put you over your limit.  You can “opt in” to paying the overage fees if you don’t want to be stopped from going over your limit (although that doesn’t seem like a good idea).

Your payments are required to be put towards the highest interest rates, which ideally would help you pay down your debt faster.

Here’s where the negatives come in.  It will be more difficult for you to get credit if you currently have bad credit.  That could be positive or negative, but mostly it seems like a catch-22.  You’ll be prevented from going further into debt by not being allowed more credit, but this could also cause you to go deeper into debt when you most need to be rescued and are struggling to pay your current bills.

There has been talk that the credit card companies will now be searching for other ways to make money off of their customers.  Potential consequences of the new law might be higher interest rates across the board, whether you have good or bad credit.  The companies might re-introduce annual fees to credit cards (making it hard for those with bad credit to get new credit and causing good credit customers to stop using their cards) and scale back rewards programs.  Worst of all, if you have a good history of paying your bill in full and on time, your purchases might start to accrue interest immediately.

This law will not be fully into effect until July 2010, though, so creditors have plenty of time to raise your interest rates, lower your limits, change your due dates, etc., until then.  It appears that most of the negatives are currently speculation, so we’ll see what actually happens in the months to come.  Keep an eye on your accounts in the meantime, and keep up with or start good credit habits to avoid any of the bigger pitfalls once the law is enacted.

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