New consumer-friendly credit card regulations take effect today, after widespread complaints about unfair industry practices. President Obama signed a bill last May that restricts certain credit card fees, reforms billing practices and requires companies to give customers more notice on changes in interest rates or terms of their accounts. Customers will have the right to cancel their accounts if they don’t agree with the new terms.
USA Today breaks down what the new rules mean for customers.
New: Credit card companies can no longer raise interest rates retroactively on existing balances. In addition, if you open a new credit card account, the issuer can’t raise the interest rate for 12 months.
What Hasn’t Changes: The legislation imposes no limits on the rates credit card issuers can charge new customers. Nor does it limit how much card issuers can raise rates on future purchases, said USA Today.
New: Credit card companies can no longer to charge a fee when you exceed your credit limit.
What Hasn’t Changes: Companies will still be allowed to charge annual fees, inactivity fees and other types of fees. Many experts agree companies will increase those fees.
New: Consumers often have different interest rates for new purchases, transfer balances and cash advances on the same credit card. Companies usually apply full payments to the lowest interest rate. Under the new regulations, they must apply payments over the minimum to the highest interest balances.
Also, customers must receive their bills at least 21 days before payment is due, and payment due dates must be the same every month. Banks can no longer use a customer’s average daily balance over two months to calculate interest, a practice known as “double-cycle billing,” said USA Today.
What Hasn’t Changed: If a customer only makes the minimum payment, the company can still apply that amount to the lowest-interest rate balance.
Disclosures and Notices:
New: Companies must give customers 45 days’ notice before raising interest rates, changing certain fees, such as annual fees or cash advance fees, or making other significant account changes. Card issuers also have to provide customers with more information about their accounts, such as how much you’d have to pay monthly to eliminate your balance in three years.
What Hasn’t Changed: Companies can close your account or lower your credit limit for any reason without giving advance notice.
This article was submitted by Katie Kapler, Director of Online Strategy for Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to firstname.lastname@example.org