New credit card rules take effect

A bunch of new credit card regulations took effect yesterday. Some of them should be interesting.

One of the most eye-opening new changes requires credit card companies to let customers know how long it will take them to pay off a credit card if only paying the minimum balance each month. According to the Associate Press, if you have a $3,000 balance at 14%, it will take you 10 years to pay off the balance if you only make the minimum payment. How’s that for a wake-up call on your bill each month? They are also required to tell customers how much it will cost. I hope people begin to realize just how much their credit card debt is costing them. Hopefully, it will motivate people to get on a plan to reduce their debt.

Other regulations include limitations on interest rate increases, even for late payments, and lengthening the time you’ll have to pay your bill after the statement closing date. There is, however, no limit to the interest rates the credit card companies can charge. The only limit is how they can implement those increases. The credit card companies will also not be allowed to let you charge over your balance unless they have your authorization.

Economists predict that this legislation will cost credit card companies hundreds of millions each year. Therefore, the credit card companies are getting creative with their fees. Watch your statements for new annual fees, statement fees and rewards program fees. If you pay your bill late, you risk losing your rewards points or airline miles unless you pay a reinstatement fee.

Whether this legislation will be good for consumers is still up for debate. Many issuers have cut back their credit lines or cancelled them all together. My hope is that people will stop carrying balances and learn to save for the things they want. Maybe after seeing how much that trip is really going to cost, the American people will save for that next vacation.

Do you think the new credit card legislation will help or hurt consumers?

Help! The fees are coming, the fees are coming!

credit-cards

In 2009, the powers that be decided to save all of us from high interest rates on our credit cards. I can see that this was a noble effort to stop those greedy banks from taking advantage of consumers, but if the legislation was so important, why did Congress decide that the legislation should not take effect for a year?

The credit card companies know they are running out of time. The new law takes effect in April, so they are doing everything they can to raise your fees and interest rates before the deadline. You need to be prepared. There are going to be lots of little dirt tricks so be on the look out! Here are some of ways they’ll try to get ya.

1. Raising your interest rate.

Watch your mail for a letter from your credit card company stating they are changing the terms of your agreement. Along with the change in terms is a huge interest rate hike. If you read the blog, you know I hate credit cards. I’m doing my best to get out of debt ASAP. I got one of those letters last year. The letter stated that I could “opt out” of the changes. I called the credit card company and was informed that I could “opt out” but I wouldn’t be able to use my card anymore. OH NO! You mean I can’t use your crappy card to get further into debt at a ridiculously high interest rate? You mean if I opt out, I can keep my super low interest rate and pay you off faster so I can never use you again? I’ll take option 2 please.

2. Annual fees

Since the credit card companies will not be allowed to raise interest rates if you miss a payment or have a poor credit history, those who use their cards for the rewards points are going to pay. Watch your statements for new annual account fees. These fees could be as high as $150 a year. I’m not willing to pay $150 a year for a gym membership and you think I’m going to pay this for a credit card? Um…no.

3. Inactivity fees

This is a fun fee. If you don’t use your card or  if you don’t carry a balance on your card, therefore incurring interest charges, you could get whacked with a fee. Again, watch those statements and make sure you open every piece of mail you get from your credit card companies.

4. Statement fees

Some companies, including World Financial Network National Bank, which handles the credit cards for some of your favorite stores (Ann Taylor, Victoria Secret and others) is introducing a $1 statement fee if you elect to have your statement sent to you snail mail. You can avoid this fee by signing up for electronic statements. I’m sure if you opt for the electronic statements, they’ll wave the late payment fee because you missed the email. Yeah right.

Watch for these and other fees in the coming months. Make sure you read your statements carefully and watch your interest rate from month to month. January is a good time to review your credit cards and make sure you are getting the best deal possible.

Interest rates down again

I got an email from ING DIRECT stating that my March statement was ready. My interest rate dropped twice last month. I’m not earning 1.50% on my savings account with them. I decided to run over to Webster Bank’s site to see what they are paying for a savings account. With a normal, run-of-the-mill savings account the rates are .30%. So my ING account is earning five times that. That made me feel better.
Then I looked at the interest rates for their premier savings accounts. The interest rate for the premier savings is 2.00% if you meet all the qualifications. There are many. First you must have over $25,000 in the account to get that rate. You must also have a premier checking account. To qualify for that, you must have at least $10,000 in cash or $50,000 in loans, cash and CD’s with the bank. Well, if you’ve got the $25,000 in the savings account to get the higher rate, you qualify. There are all sorts of free services that come with the premier account, but none of them are appealing to me.

My point here is to make sure you have the best banking products for your situation. I don’t have tons of cash on hand because I’m paying down debt. If you have a large emergency savings account (good for you!), maybe one of these options is better for you. Check out all your options and then decide.

How much are you earning on your savings? Do you find yourself trying to put more aside due to the bad economy?

Watch out for changes to your credit card terms

Yesterday, I got a letter from Citibank outlining changes to my credit card terms. I just about had a heart attack. Citibank wanted to change my interest rate to the LIBOR average (a rate banks use to lend money to each other) plus 21.99%. The new minimum rate on the card would be 24.99%. That’s more than double my current rate!