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the consumer. These rules take effect Monday, February 22nd, 2010. These changes are outlined below and are mostly taken from a website of the Federal Reserve. If you would like to visit this site yourself, please go to http://www.federalreserve.gov/consumerinfo/wyntk/creditcardrules.htm.
The first such change is that when credit card companies plan to increase the interest rate that they charge on outstanding balances, they must notify you at least forty-five days ahead. Furthermore, they must also provide this advanced notice regarding the changing of other terms such as the annual fee charged to have the card, cash advance fees and late fees. However, this forty-five day rule is waived if you have purchased a card with a variable interest rate tied to an underlying index, a pre-determined introductory rate has expired or you are in a workout agreement and you haven’t kept up your end of the deal.
“If your credit card company is going to make changes to the terms of your card, it must give you the option to cancel the card before certain fee increases take effect.” However, it is important to note that if the cardholder chooses to “opt-in” to this agreement, your credit card company may close your account, increase your monthly payment and provide an amortization period, all of which are subject to certain limitations. As an aside, the concerns callers are expressing when they phone our Channel 6 Answers Team is one in which they have opted-in, but the credit card companies have raised their minimum monthly payment so much that now the payment is unaffordable.
You will notice another change when you read over your statement. These statements from the credit card companies must now include information on how long it will take to pay off your balance if you make only minimum monthly payments. However, the statement will also include information on how much you will need to pay each month to pay your balance off in three years. The website noted above provides an example of a consumer with a credit card balance of $3,000 and an interest rate of 14.4%. The minimum monthly payment is $90.00 in which the card balance will be paid off in eleven years. However, the table highlights that should the cardholder pay a mere $13.00 more or $103.00 per month, the payoff period drops from eleven years to only three. Furthermore, the statement details that the customer will save $1,033 in interest that would have been levied.
In addition to these rule changes, credit card companies are no longer allowed to increase interest rates on new cards during the first twelve months unless the rate is one which is variable and tied to an index, is an introductory rate or you are more than sixty days late in paying your bill. Even so, if your credit card company raises your rate during the first year or at any time thereafter, it can do so only on new charges.
THE BOTTOM LINE – Let’s make this short and sweet. Americans have spent more than they have taken in over the past twenty-five years creating credit card nightmares for millions. Are we any happier? We suggest that we are not. While discussing this issue with our Dad and Mom, he noted that with six kids a night out was a treat and not a routine event. We remembered evenings of playing Monopoly and Bingo and not sitting in front of a 50” television. We thought we were rich. He reminded us the other day we were not. Perhaps we can all learn from this. Life is about relationships, experiences and spending time with the ones you love. That is what we will remember when all is said and done. It is not about who acquires the most toys. Spend within your means.