New Credit Card Regulations on the Way

Back in the 2008 election cycle, Barack Obama unveiled his Credit Card Bill of Rights and he's acted on that promise with new regulations that go into effect on February 22nd.  These regulation will affect your current credit card plan or applying for a card in the future, so here's what you need to know about the new laws on the books.  There are a lot of changes that make up the new regulations, but here are the ones that will have the greatest impact. 

Interest Rates: The APR cannot go up in the first 12-months of the card, and a promotional rate has to last at least six months without premature expiration.  Significantly, rates can't go up arbitrarily on existing cards either.  In the past, credit card companies could raise rates not only on future payments, but all purchases you made in the past. Universal defaults have also been banned.  This was the practice of raising rates on your credit card if you were late on a totally unrelated type of bill (one of the bigger scams of credit card companies).

Billing and paperwork: Credit card companies need to alert consumers of changes in policy 45 days in advance.  Often, cardholders would have no idea that a change had been made.  As credit card companies could raise rates "at their discretion," even if a cardholder was on time with payments, many cardholders wouldn't be aware that rates went up because they figured they were safe.  The fine print language is deemed to be more straight-forward, accessible, and less "fine."

Other changes to billing: Card companies can't charge for a default if the billing cycle date falls on the weekend. Also, new finance charges cannot be added to a previous payments (known as double-cycle billing).  Card companies have to send a bill 21 days in advance of the due date.  Illustrating the scaminess of credit card companies, they would send a bill close to the due date because this would make it more likely that a cardholder would default.

Fees: There's now an opt-in clause for over the limit fees.  Keep in mind that if you opt-out, all over the limit purchases will be rejected by the merchant.  This could be a good way to manage your credit card spending and ensure you never go over the limit. There are no fees for paying by phone, online, or by mail - some of the hidden fees that card companies tack on.

There are other changes but those are the big ones, as they will change how cardholders get charged month to month.  By and large, these are very good developments because for too long credit card companies were able to take advantage of cardholders.  Yes, credit cards are convenient and that convenience should cost something, but card companies were piling on the charges, sometimes for little reason.

Check out Boston.com for a comprehensive list of credit card changes.