News & Events
Impact of new credit card law
Impact of new credit card law The new credit card law recently went into effect offering consumers greater protections. With Americans’ credit card debt reaching almost $1 trillion, consumers clearly rely heavily on credit cards to pay for purchases. Understanding the new protections will allow consumers a greater ability to manage their credit cards wisely.
Generally speaking, the new consumer protections, affective last month, help in the following ways:
- Restricts most interest rate increases during the first year. The exceptions to this are: the end of a promotional rate period; interest rate increases tied to a variable indexed interest rate; and if minimum payments are not received within 60 days after payment due date.
- Restricts interest rate increases on existing balances. The exceptions to this are the same as above.
- 45 day advance notice required if interest rate is increasing on future purchases or other significant terms are changing.
- Consumer has the right to close the account before the effective date of any change. If the consumer exercises this right, the credit card company cannot require immediate repayment of the entire balance and must structure repayment according to one of two prescribed methods.
- Limits on fees and penalty interest.
In addition to these new protections, consumers will also see a newly designed monthly statement which is aimed at educating consumers about their credit card debt. The statement will now be in a tabular format to more clearly show the rates and terms of the account while boxes will highlight how long it will take to pay off the balance owed by paying only the minimum payment, and how much more your monthly payment would need to be to pay the entire debt off in three years. Changes to interest rates will be disclosed in their own box as will account term changes.
The end result is that consumers can now more easily read their statements to better understand the rates, fees and terms associated with their cards. Savvy consumers can use this knowledge to better manage their debt load by identifying the card with the highest interest rate in order to pay off that card quickly and paying more than the minimum payment amount each month.
