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?