New Credit Card Law Helps
Teens and Parents
If you use credit cards, there's good news. In response to consumer outcry, Congress passed the Credit Cardholders Bill of Rights, which went into full effect in February.
"The new law bans the worst unfair practices the banks had been perpetrating on consumers," notes Ed Mierzwinski, director of consumer programs at the public advocacy group U.S. PIRG, as quoted on msnbc.com.
One of the biggest positive impacts may be on teens. In recent years card issuers have shown up at college campuses, giving free T-shirts and other incentives to students who sign up for credit cards. Sallie Mae recently reported that these students carried an average balance of over $3,000, and 82 percent didn't pay the balance in full each month. Under the new requirements, applicants under 21 now must have a co-signer or show proof of income.
Here's an overview of other changes, including restrictions on "gotcha" fees. To enjoy these benefits, you need to pay on time and avoid using more than one-third of your limit.
Rate Increases - Rates can't be raised retroactively if you pay on time.
Notification - You must receive 45 days' notice before a rate increase on new balances, though they can still lower your credit limit with little notice.
Longer Grace Period - Issuers must send statements 21 days before the due date, not just 14 days.
Payment Fees - You won't be charged to make a payment by phone or on the Internet unless you're expediting payment.
Over-limit Fees - Unless you agree in advance, banks can no longer allow over-limit purchases and then hit you with multiple overdraft fees.
Double-cycle Billing - Finance charges can no longer be based on the current plus the previous balance, which allowed issuers to charge interest on debt you paid the previous month.
Payment Allocation - Above-the-minimum payments must first be applied to the balance with the highest interest rate.
Gift Cards - Gift cards can't expire for at least five years, and inactivity fees can't be charged until after 12 months of non-use.
Meanwhile, card issuers may try to find new ways to build revenue. For example, since issuers don't make money on those who always pay in full, you may have to choose between losing your grace period or paying an annual fee of $50 to $100.
When used properly, credit cards can be safer and more convenient than carrying cash. So, it's okay to continue to give yourself credit ... just not too much!