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5 Things You Should Know About the New Credit Card Rules

5 Things You Should Know About the New Credit Card Rules

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After receiving over 60,000 comments, federal banking regulators passed new rules late last year to curb harmful credit card industry practices. These new rules go into effect in 2010 and could provide relief to many debt-burdened consumers. Here are those practices, how the new regulations address them and what you need to know about these new rules.
After receiving over 60,000 comments, federal banking regulators passed new rules late last year to curb harmful credit card industry practices. These new rules go into effect in 2010 and could provide relief to many debt-burdened consumers. Here are those practices, how the new regulations address them and what you need to know about these new rules.

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Categories:Types, Business/Law
Published by: National Financial Awareness Network on Feb 12, 2009
Copyright:Attribution Non-commercial

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06/11/2012

 
© 2009 National Financial Awareness Network, Inc.
 
5 Things You Should Know aboutthe New Credit Card Rules!
After receiving over 60,000 comments, federal bankingregulators passed new rules late last year to curb harmful creditcard industry practices. These new rules go into effect in 2010and could provide relief to many debt-burdened consumers.Here are those practices, how the new regulations address themand what you need to know about these new rules.
 
1.Late Payments
Some credit card companies went to extraordinary lengths to cause cardholder  payments to be late. For example, some companies set the date to August 5, butalso set the cutoff time to 1:00 pm so that if they received the payment onAugust 5 at 1:05 pm, they could consider the payment late. Some companiesmailed statements out to their cardholders just days before the payment due dateso cardholders wouldn’t have enough time to mail in a payment. As soon as oneof these tactics worked, the credit cardcompany would slap the cardholder with a $35late fee and hike their APR to the defaultinterest rate. People saw their interest rates gofrom a reasonable 9.99 percent to as high as39.99 percent overnight just because of theseand similar tricks of the credit card trade.The new rules state that credit card companiescannot consider a payment late for any reason"unless consumers have been provided areasonable amount of time to make the payment." They also state that creditcompanies can comply with this requirement by "adopting reasonable procedures designedto ensure that periodic statements are mailed or delivered at least 21 days beforethe payment due date." However, credit card companies cannot set cutoff timesearlier than 5 pm and if creditors set due dates that coincide with dates on whichthe US Postal Service does not deliver mail, the creditor must accept the payment as on-time if they receive it on the following business day.This rule mostly impacts cardholders who often pay their bill on the due dateinstead of a little early. If you fall into this category, then you will want to payclose attention to the postmarked date on your credit card statements to makesure they were sent at least 21 days before the due date. Of course, you shouldstill strive to make your payments on time, but you should also insist that creditcard companies consider on-time payments as being on time. Furthermore,
these rules do not go into effect until 2010, so be on the lookout for an increasein late-payment-inducing tricks during 2009
.
© 2009 National Financial Awareness Network, Inc.
 
2.Allocation of Payments
Did you know that your credit card account likely has more than one interestrate? Your statement only shows one balance, but the credit card companiesdivide your balance into different types of charges, such as balance transfers, purchases and cash advances.Here's an example: They lure you with a zero or low percent balance transfer for several months. After you get comfortable with your card, you charge a purchase or two and make all your payments on time. However, purchases areassessed an 18 percent APR, so that portion of your balance is costing you themost -- and the credit card companies know it and are counting on it. So, whenyou send in your payment, theyapply all of your payment to the zeroor low percent portion of you balance and let the higher interest portion sit there untouched, rackingup interest charges until all of the balance transfer portion of the balance is paid off (and this could takea long time because balancetransfers are typically largethan purchases because theyconsist of multiple, previous purchases). Essentially, the credit card companieswere rigging their payment system to maximize its profits -- all at the expenseof your financial wellbeing.The new rules state that the amount paid above the minimum monthly paymentmust be distributed across the different portions of the balance, not just to thelowest interest portion. This reduces the amount of interest charges cardholders pay by reducing higher-interest portions sooner. It may also reduce the amountof time it takes to pay off balances.This rule will only affect cardholders who pay more than the minimum monthly payment. If you only make the minimum monthly payment, then you will stilllikely end up taking years, possibly decades, to pay off your balances. However,if you adopt a policy of always paying more than the minimum, then this newrule will directly benefit you. Of course, paying more than the minimum isalways a good idea, so don't wait until 2010 to start.
© 2009 National Financial Awareness Network, Inc.
Photo Credit: http://www.sxc.hu/profile/miamiamia

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