How The New Credit Card Reforms Affect You

May 20th, 2009

creditcardmarketYou have, no doubt, heard about the upcoming credit card reforms on the way.  If you’ve ever wondered how it affects you directly (at the form it’s shaping up to be), best read on and find out.

The new bill does put many limitations on credit card issuers, although it’s still not the consumer savior we originally thought it to be.  To start with, the following restrictions are now set on them, among a few others:

1. No interest rate increase on existing balances, unless payment is 60 days late.  If the cardholder pays the minimum on time, after the hike, the issuer will need to restore the old rate after six months.
2. Consumers will need to receive a notice explaining the interest rate hike 45 days before the actual increase.
3. Some planned caps on penalties (still to be determined by the Federal Reserve)
4. If an issuer uses “risk-based pricing” to raise rate, they’ll have to use the same to lower rates
5. No charges are allowed anymore on automated phone and online payments
6. Issuers can only charge over-the-limit fees for three consecutive months for a single infraction.
7. Everyone under 21 can no longer get a credit card without either an independent source of income or a co-signer.

With these changes in effect, there’s no doubt that it will bring serious repercussions to credit card issuers’ bottom line – unless they compensate for the lost income somewhere else.  As such, people are now predicting an across-the-board hike on interest rates for all future credit card balances.  Since the upcoming reforms didn’t put a cap as to how much interest rates issuers can charge, expect it to be a considerable hike, regardless of your credit standing.

Credit card companies are required to implement the changes within the next nine months.

noel Posted in Credit Card Guides

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