Friday, July 30, 2010

Has the New Credit Card Law Benefited You?

Has credit cards become safer with new legislation in place? Do you know what are the safeguards that have been implemented to prevent predatory policies of the credit card companies?

1. Retroactive rate increased

Credit card issuers should not increase rates until the promotional rate expires. According to the universal default clauses, you are not accountable to any penalty charges for late payment on unrelated account.

If you are late by 60days in the repayment plan, then you may be exposed to the costly default rate. But if you provide evidence of 6 months of consecutive timely payment, the bank can lower your rates.

2. Advance notice on rate hikes

According to Lending Act, only 15 days notice is given to the card holder before the implementation of any plan. If there is any change in the terms of the contract which includes the hike in the rate that needs to be notified before 45days. However, the bank does not need to give advance notice for adjustment of credit card limit.

3. Restriction on charges

An over-limit fee would be charged on the approval by your creditor. Banks cannot levy any charges to settle credit card debt but they can contact you for repayment through telephone or internet. A penalty can be charged on your outstanding balance just to quicken the repayment process.

If the merchant bank fails to accept the payment by mail, then they might not levy additional charges for it. If the payment is made in the local branch office then it would be advisable to pay off the amount before the due date. Any delay in the payment in this process is charged with a late fee.

4. Restrain Youngsters From Credit Cards

For those below 21 years old, you need to show that you are financially stable before applying for a credit card. Else, a co signer above the age of 21 years is required.

Since most youngsters are not savvy enough to use credit cards responsibly, the law will prevent them from getting into debt too early.

5. End of double cycle billing

The new law banned the double cycle billing. In the past, the credit card issuer can charge interest rate on the amount that had been paid off the previous month which is very unfair.

Overall, I think the changes will definitely benefit consumers. But even with some evil practices curbed, you can rest assured that bankers/credit card companies will still be able to fleece, erm, make money from consumers through other means.