 |
Tags: finance, credit, the new credit card law s impact on you
 I’ve received quite a number of emails asking me about the new credit card law that was signed by President Obama. Many were wondering how it would affect them, and a not a few were asking about how it especially affects the younger spenders. Let me talk about it so you can get an understanding of the new credit card law s impact on you.
Last May 22nd, President Obama signed into law the Credit Card Accountability, Responsibility and Disclosure Act of 2009. This new legislation, which will start to take effect come August of this year and fully take effect sometime in July 2010, represents a major overhaul of the credit card industry. The new credit card law gives new restrictions on CC issuers to maintain among others, fair practices, avoid interest rate increases without notification, increasing fees, or penalizing customers who pay their balances on time.
advertisement
Let’s talk about specific provisions of the new credit card law. One provision deals with interest rates. Under this provision the CC companies must give you 45 days advance notice for any rate increase or any significant changes to the terms of use. At the same time your billing statements are due twenty-one days from the date it was mailed to you—this was a change from the fourteen days it used to be.
This means that the CC issuers cannot mail you your statements at the last moment in the hope you won’t have time to send in the payment and thus have to pay the late fees. The new credit card law has also done away with the universal default system which means that one CC company cannot arbitrarily increase your interest rate because you were late paying another CC company's bill.
The only way they can raise interest rates is if the consumer is 60 days or more past due, a promotional rate has expired, the consumer failed or completed a workout plan, or the variable rate increased due to index movement. Other than that no rate increase can be done.
At the same time, the CC companies have to revert back to the interest rate if your account stayed current for six months after your late payment. The new credit card law also allows you to opt-out of the penalties for going over your limit. What this means is that your purchases will be denied if you don’t opt in for the penalties of going over your limit—if you do opt-in then you can go over the limit albeit with the corresponding penalties.
The new credit card law also mandates that any payment you make goes to paying off the higher interest amounts first. A major provision of the new credit card law that has a lot of younger people up in arms is the one that restricts those under twenty-one years of age from getting issued one unless a parent, guardian, or spouse is willing to co-sign the application or unless said underage person has proof of sufficient income to cover his or her payment obligations.
Supporters of this provision stated that their aim was to prevent CC companies from “targeting college kids to weigh them down with debt before they even graduate.” Not surprisingly there is debate as to how effective this provision will be in protecting younger people. On the one hand by requiring a co-signer, a young applicant will be matched with someone who is supposedly better educated in managing finances so that bad habits will not be learned.
I say supposedly because as we all know, just because one is over 21 doesn’t mean they are good in managing their finances. At the same time it will be harder to create a good financial history since you will have to start much later. It remains to be seen just how effective this new credit card law will be.
Let us hope.
About the author
The author of this article Rick Goldfeller is a successful underground Financial Analyst who has been advising and coaching individuals for many years. Rick recently published a book on how to manage your money and attract Wealth and Financial Freedom. More info on his Finance Planning course is available HERE.
Share this article
You may reprint this article in its entirety on your web site, newsletter or ezine, providing you leave the About the author sections intact. You may not alter the contents.
|
|
