The Federal Reserve’s new rules for credit card companies mean new credit card protections for you. Here are some changes from your credit card company that began this year.
When they plan to increase your rate or other fees. Your credit card company must send you a notice 45 days before they can increase your interest rate; change certain fees (such as annual fees, cash advance fees, and late fees) that apply to your account; or make other significant changes to the terms of your card. So if the company does this, it must give you the option to cancel the card before certain fee increases take effect. If you take that option, however, your credit card company may close your account and increase your monthly payment, subject to certain limitations. For example, they can require you to pay the balance off in five years, or they can double the percentage of your balance used to calculate your minimum payment (which will result in faster repayment than under the terms of your account).
How long it will take to pay off your balance. Your monthly credit card bill includes information on how long it will take you to pay off your balance if you only make minimum payments. It also tells you how much you would need to pay each month in order to pay off your balance in three years.
No interest rate increases for the first year. Your credit card company cannot increase your rate for the first 12 months after you open an account. If your card has a variable interest rate tied to an index though; your rate can go up whenever the index goes up. If there is an introductory rate, it must be in place for at least 6 months; after that your rate can revert to the “go-to” rate the company disclosed when you got the card. If you are more than 60 days late in paying your bill, your rate can go up. If you are in a workout agreement and you don’t make your payments as agreed, your rate can go up.
Increased rates apply only to new charges. If your credit card company does raise your interest rate after the first year, the new rate will apply only to new charges you make. If you have a balance, your old interest rate will apply to that balance.
Over-the-limit transactions. You must tell your credit card company that you want it to allow transactions that will take you over your credit limit. Otherwise, if a transaction would take you over your limit, it may be turned down. If you opt-in to allowing transactions that take you over your credit limit, your credit card company can impose only one fee per billing cycle. You can revoke your opt-in at any time.
Caps on high-fee cards. If your credit card company requires you to pay fees (such as an annual fee or application fee), those fees cannot total more than 25% of the initial credit limit. Protections for underage consumers. If you are under 21, you will need to show that you are able to make payments, or you will need a cosigner, in order to open a credit card account. If you are under age 21 and have a card with a cosigner and want an increase in the credit limit, your cosigner must agree in writing to the increase.
Standard payment dates and times. You must get your credit card bill at least 21 days before your payment is due and your due date should be the same date each month. The payment cut-off time cannot be earlier than 5 p.m. on the due date. If your payment due date is on a weekend or holiday (when the company does not process payments), you will have until the following business day to pay
These new changes should help you manage your credit card balance and help you understand how to get these balances reduced.
The Money Mom
