Congress is watching out for us – and this time, it might really be a GOOD thing! Credit card users can expect the most dramatic changes in credit terms, interest rates and fees in decades once a new federal credit card law fully goes into effect later this summer. (to read the full Act, click here)
The intent from Congress was to have bills that are easier to read, restrictions on Banks issuing cards to Minors… but Bankers are GOING to make money, so I think we can expect higher up front fees.
“Credit card issuers and credit industry analysts say the credit card reform law will make credit cards more costly for all users and unaccessible for low-income families and people with bad credit. Look for the return of routine annual fees, fewer rewards cards and the possibility that credit card bills will be payable immediately rather than after a month-long grace period.”
Below are some of the important parts of this bill:
Limited interest rate hikes: Interest rate hikes on existing balances would be allowed only under limited conditions, such as when a promotional rate ends, there is a variable rate or if the cardholder makes a late payment. Interest rates on new transactions can increase only after the first year. Significant changes in terms on accounts cannot occur without 45 days’ advance notice of the change. (YEAH!)
Limited universal default: “Universal default,” the practice of raising interest rates on customers based on their payment records with other unrelated credit issuers (such as utility companies and other creditors), would end for existing credit card balances. Card issuers would still be allowed to use universal default on future credit card balances if they give at least 45 days’ advance notice of the change.
The right to opt out: Consumers now have the right to opt out of — or reject — certain significant changes in terms on their accounts. Opting out means cardholders agree to close their accounts and pay off the balance under the old terms. They have at least five years to pay the balance.
Limited credit to young adults: Credit card issuers will be banned from issuing credit cards to anyone under 21, unless they have adult co-signers on the accounts or can show proof they have enough income to repay the card debt. Credit card companies must stay at least 1,000 feet from college campuses if they are offering free pizza or other gifts to entice students to apply for credit cards.
Highest interest balances paid first: When consumers have accounts that carry different interest rates for different types of purchases (i.e., cash advances, regular purchases, balance transfers or ATM withdrawals), payments in excess of the minimum amount due must go to balances with higher interest rates first. Current industry practice is to apply all amounts over the minimum monthly payments to the lowest-interest balances first — thus extending the time it takes to pay off higher-interest rate balances.
Limits on over-limit fees: Consumers must “opt in” to over-limit fees. Those who opt out would have their transactions rejected if they exceed their credit limits, thus avoiding over-limit fees. Fees charged for going over the limit must be reasonable.
No more double-cycle billing: Finance charges on outstanding credit card balances would be computed based on purchases made in the current cycle rather than going back to the previous billing cycle to calculate interest charges. So-called two-cycle or double-cycle billing hurts consumers who pay off their balances, because they are hit with finance charges from the previous cycle even though they have paid the bill in full.
Subprime credit cards for people with bad credit:People who get subprime credit cards and are charged account-opening fees that eat up their available balances would get some relief under the new credit card law. These upfront fees cannot exceed 25 percent of the available credit limit in the first year of the card. Instead of charging high upfront fees, some issuers are considering high interest rates on these high credit risk accounts.
Minimum payments: Credit card issuers must disclose to cardholders the consequences of making only minimum payments each month, namely how long it would take to pay off the entire balance if users only made the minimum monthly payment. Issuers must also provide information on how much users must pay each month if they want to pay off their balances in 36 months, including the amount of interest.
And last… but not least, you know that Silly jingle about “F-R Double E spells FREE .. FreeCreditReport.com” well, later this year, they will have to tell you that they are not really free! (click here for more details). If you want a TRULY free credit report – check this out.
For credit repair assistance, don’t waste your money! Give us a call! Steve Thorne, Mortgage Loan Officer in Cary helping NC homebuyers make dreams come true! If you have questions about pre-qualifying for a mortgage loan in North Carolina, or Minimum Credit Scores – please call us! Steve and Eleanor Thorne 919 649 5058 . We know how to get borrowers in NC approved, we know what credit scores and reports the Underwriters will take. We’ll call you back, and if you need to add another credit card, or pay something off – we’ll work with you. Here’s some GOOD CREDIT Advice (and it’s FREE!)!