Credit card interest rates just one area affected by new law

The Senate has passed its own version of the new credit card bill and everyone expects that the House and Senate reconciliation will become law within a few weeks.   The law goes farther than the new regulations passed by the Fed for mid-2010, and will take effect sooner.

Here are the most important new benefits.

  • Although the bill will not restrict overall credit card rates (that amendment was defeated) credit card interest rates can no longer be changed at will by the issuers.  They cannot raise your rate unless you are delinquent for 60 days, and if you make payments on time for six months, they have to reduce the rate back to the original rate.
  • Teaser credit card interest rates must last for at least six months. Interest rates cannot be raised during the first year of the account.
  • Payments to your account must be applied to the balance with the highest interest rate, not the lowest as has been standard practice.
  • If they follow the new restrictions, credit card issuers can still change your interest rate and other terms, but they must give you at least 45 days notice for any changes to significant terms on the card.

Changes not dealing with interest rates include:

  • Bills must be sent at least 21 days before the due date.  You have until 5 PM on the due date to make your payment.  Credit card issuers can no longer charge you for telephone payments.
  • Your bill must contain information showing the months it would take to pay off the balance if you make only the minimum payment, and the number of dollars of interest you will be paying.
  • You cannot be charged an over-limit fee unless you agree to it.  If you do not agree, your card will be rejected if you try to make a charge that goes over the limit.

There are many different types of cards that we often call “credit cards” but this law applies only to those that actually involve credit.  A description of the different types of credit cards is in our archives.

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