Staring Feb. 22, 2010, credit card companies will be required to give you more information, more proactively. This means you'll have more choice about how you manage your finances. The rules are designed to help credit card users keep their credit scores high and avoid snowballing debts. Here are those requirements, and how they affect you.
Requirement 1: Starting on Feb 22, your credit card company will have to tell you 45 days in advance before they increase your interest rate, change certain standard fees, or make any other significant changes to the terms of your credit card account.
Included in this requirement is your right to cancel that credit card before the changes take effect. Credit card companies can, however, cancel your account, and increase your minimum monthly payment, if you take that option.
There will be some limits to the credit company's rights in that regard.
The credit card company will have options such as calculating your minimum payments based on a higher interest rate than actually applies to your debt, or setting a reasonable time frame for repayment of your balance.
Not all changes to your credit card account will be affected by this 45-day notice rule. Some of the kinds of account changes which do not bring the 45-day advance notice rule into effect, are:
Requirement 2: Starting Feb. 22, your credit card bill will include two new figures about your debt repayment time line. (a) Each monthly bill will show you how long until your debt is paid off if you make minimum monthly payments. (b) It will also state the amount to pay each month if you want to repay the balance in three years.
This information may also include explicit "minimum payment warnings," reminding you that paying only the minimum monthly payment, will cause you to pay more on your credit card debt over time.
Requirement 3: There are new rules on credit card terms. Credit card companies will not be allowed to increase your interest rate during the first year you hold the card. The only exceptions to this rule are:
Another new rule on credit card terms: rate increases can no longer be retroactive. If your credit card interest rate increases, the new rate only applies to charges made after that increase.
Also, credit card companies can no longer approve over-the-limit purchases unless you specifically opt-in to be covered for those purchases. If the credit card company authorizes such a purchase without your explicit request, they are not allowed to charge you an over-the-limit fee. In any case, once these rules take effect, such over-the-limit fees can only be charged for one transaction per billing cycle. You must be allowed to opt-out of over-the-limit coverage at any time.
Another fee-related rule: "other" fees, such as yearly account fees and application fees, may not exceed 25% of the credit card's limit per year. This rule doesn't apply to penalties.
Credit card companies must begin to require proof of sufficient income when offering a credit card to customers under the age of 21, or, must obtain a cosigner on those accounts. If a cosigner is linked to a credit card account, that cosigner must agree in writing whenever the credit card limit is raised.
Requirement 4: There are new rules relating to billing terms and payment plans.
The exception is for customers participating in a deferred-interest account - accounts with terms such as "No interest if paid in full by February 2013."
In that case, this rule splits based on how soon that deadline is approaching:
(a) If there are only 2 billing cycles remaining before that account starts to charge you interest, then your payment must be applied to that deferred-interest account.
(b) Otherwise, the company might let you choose which account to apply over-payment to.
Requirement 1: Starting on Feb 22, your credit card company will have to tell you 45 days in advance before they increase your interest rate, change certain standard fees, or make any other significant changes to the terms of your credit card account.
Included in this requirement is your right to cancel that credit card before the changes take effect. Credit card companies can, however, cancel your account, and increase your minimum monthly payment, if you take that option.
There will be some limits to the credit company's rights in that regard.
The credit card company will have options such as calculating your minimum payments based on a higher interest rate than actually applies to your debt, or setting a reasonable time frame for repayment of your balance.
Not all changes to your credit card account will be affected by this 45-day notice rule. Some of the kinds of account changes which do not bring the 45-day advance notice rule into effect, are:
- Changes in interest rates which are tied to a financial index.
- Expiration of introductory interest rates.
- Interest rate changes arising from a payment arrangement after your account falls into arrears.
Requirement 2: Starting Feb. 22, your credit card bill will include two new figures about your debt repayment time line. (a) Each monthly bill will show you how long until your debt is paid off if you make minimum monthly payments. (b) It will also state the amount to pay each month if you want to repay the balance in three years.
This information may also include explicit "minimum payment warnings," reminding you that paying only the minimum monthly payment, will cause you to pay more on your credit card debt over time.
Requirement 3: There are new rules on credit card terms. Credit card companies will not be allowed to increase your interest rate during the first year you hold the card. The only exceptions to this rule are:
- Interest rates tied to an index are free to increase along with that index at any time.
- Introductory rates must last at least 6 months, but can be increased to standard rates after that time.
- If your credit card payments are more than 60 days behind, the rate can increase in under a year.
- If you fail to honor payment arrangements on past-due credit card accounts, the rate can increase.
Another new rule on credit card terms: rate increases can no longer be retroactive. If your credit card interest rate increases, the new rate only applies to charges made after that increase.
Also, credit card companies can no longer approve over-the-limit purchases unless you specifically opt-in to be covered for those purchases. If the credit card company authorizes such a purchase without your explicit request, they are not allowed to charge you an over-the-limit fee. In any case, once these rules take effect, such over-the-limit fees can only be charged for one transaction per billing cycle. You must be allowed to opt-out of over-the-limit coverage at any time.
Another fee-related rule: "other" fees, such as yearly account fees and application fees, may not exceed 25% of the credit card's limit per year. This rule doesn't apply to penalties.
Credit card companies must begin to require proof of sufficient income when offering a credit card to customers under the age of 21, or, must obtain a cosigner on those accounts. If a cosigner is linked to a credit card account, that cosigner must agree in writing whenever the credit card limit is raised.
Requirement 4: There are new rules relating to billing terms and payment plans.
- Your monthly bill must be sent at least 21 days before the due date.
- Your due date must be the same each month. This can mean either on the same day of the month such as the 15th, or something such as the first day of the month.
- The payment due date cut-off time must be 5pm or later.
- A payment due date cannot fall on a date when the credit card company doesn't process payments, such as a weekend or holiday. If your standard due date would fall on a weekend or holiday, it will be automatically extended to the next business day.
- With certain exceptions, any time you pay more than the minimum monthly balance, the excess payment must be applied to the debt with the highest interest rate.
The exception is for customers participating in a deferred-interest account - accounts with terms such as "No interest if paid in full by February 2013."
In that case, this rule splits based on how soon that deadline is approaching:
(a) If there are only 2 billing cycles remaining before that account starts to charge you interest, then your payment must be applied to that deferred-interest account.
(b) Otherwise, the company might let you choose which account to apply over-payment to.
- Two-cycle, or double-cycle, interest billing is no longer allowed. You can only be charged interest on the current billing cycle, as opposed to the current-and-following billing cycles.