The new Bill of Rights Act for credit cardholders will soon be approved by the Senate and will take effect in July of next year. It’s designed primarily to help individuals that are preyed upon by “the fine print that hides the truth,” as President Obama recently put it. What exactly does the new bill do though? Here’s a run-down.
First, there will be no more double cycle billing finance charges allowed. Credit card companies will no longer legally be able to calculate their finance charges using double billing cycles, which ultimately causes credit cardholders to pay interest of balances that have already been paid.
No longer will credit card companies be allowed to increase the interest rate on pre-existing balances. This means that if your credit card company decides to raise your interest rate it will only apply to new purchases and balances and your current balance will still be subject to the same old interest rate.
No interest rate increases will be allowed during the first year of opening a new credit card unless the rate increase was disclosed when the account was opened.
The 15-day advance notice requirement for interest rate increases has been raised to 45 days. Even though your interest rate may increase during the first year if you don’t make your minimum payment within 30 days of the due date, it’s still subject to the 45 day notice.
Very importantly, your credit card company cannot leave your interest rate at the default rate if you’ve improved your credit habits. This means that increased rates must be reviewed periodically and lowered if changes are evident. This is an important issue for hundreds of thousands of Americans that have improved their habits and are still subject to crippling interest rates.
Any payments made above your minimum due must now be applied to the highest-interest rate balance, which applies if you have balances with different rates from cash advances, balance transfers or anything else.
No fees may be charged for payments made online, over the phone or by mail unless it’s a last-minute payment on the due date.
Important changes are also made to over-the-limit fees. No longer can your credit card company charge a fee for going over your limit unless you yourself request of them to process over-the-limit transactions. After the bill takes effect any transactions that are over the limit will be denied and incur no fee. Only one over-the-limit fee total is allowed per billing cycle as well and only one such fee per transaction. This means that even if your balance is over the limit during the next billing cycle it will still be subject only to a single fee. In addition, no over-the-limit fee may be charged because a hold was placed on your credit limit.
Billing statements must now be sent to you 21 days before your due date to allow you more time to pay your bill, reducing the chance that you’ll incur a late fee or interest rate penalty. Any payments you mail that are received by 5:00 PM on the due date must be considered on time. Payments are also considered on time if they’re received the next business day after a holiday or after a weekend. All payments that are made to a local branch must now be considered as received the same day. New accounts that you never activated or used, or were closed within 45 days, must be removed from your credit report as well.
These new guidelines will do much to improve the way the credit card industry lends to people. It’ll also make it easier to avoid fine-print charges and fines, as well as interest rates that are unrelated to anything you do. This new bill will help to eliminate unfair business practices in the credit card industry and make it easier for everyone to use and enjoy credit cards without fear.