Consumer-friendly Credit Card Reforms

Credit card companies have come under fire for unfair practices that almost force unwary consumers into default or bankruptcy.

The Feds have taken notice, and new rules are in the offing. The bad news is that the new rules are slated to take effect in July 2010. The good news is that in response to consumer outcry, that date may well be moved up.

What’s going to change?

Credit card companies will no longer be able to raise interest rates on balances you already owe, unless your payment is 30 days late. And, they’ll be required to give you notice that they’re going to raise those rates instead of handing it to you as a surprise on your monthly statement.

They’ll also be required to mail those statements in plenty of time for you to receive them and mail back your payment before the due date.

After the rules take effect, when you send a payment that’s more than the minimum, your credit card issuer will be required to apply that excess to the balance carrying the highest rate of interest. At present, they apply it to the lowest.

The current practice of “double-billing,” which goes virtually unnoticed by most consumers because it isn’t calculated out on the statement, will come to an end. This is the tactic in which the card issuer calculates the interest based on the average daily balance for both the current and the previous billing cycle. Thus, you might have made a $1,000 payment last month, but that $1,000 of debt will still be factored in to the interest on your current statement.

We’ll be watching for notice that the new rules have gone into effect. In the meantime, consumers need to keep a close watch on their credit card statements and any “junk mail” coming from their card issuers.

These mailings could give notice of changes in your terms that will have a profound effect on your credit score, as well as your access to credit.

Some card issuers, in an effort to lend less, are cutting card limits down to the amount currently owed. Consumers who have an automatic billing to their accounts are suddenly seeing bills that reflect an over-limit fee when they thought they had a safe cushion.

Do set up internet access to your accounts – and do check your credit limit before setting out to make a major purchase with your card.

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