Submitted by Mfinfo on Mon, 06/01/2009 - 23:12
New set of credit card reforms have been announced by the federal regulators which will come into force from July 1, 2010. The new set of rules will give the credit card users more time to pay their monthly bills, greater advance notice of changes in credit card terms, to avoid retroactive interest rate increases on existing card balances. Apart from this, credit card users will have fewer penalty fees, late charges and interest payments.
Highlights of the new credit card reforms:
Check out the highlights of the new credit card reforms as given below.
- Time limit for monthly bills: Credit card holders will get a reasonable time limit to make their monthly payments. Credit card issuers cannot change the due date without notice. Monthly bills should be delivered to the card holders at least 21 days before the due date.
- Universal default: The concept of "Universal default" should be done away with. Some large credit card issuers have already discontinued this practice. It is the practice of raising interest rates on customers based on their payment records with other non-related credit issuers.
- Interest rate hikes: There would be limited conditions where the credit card issuer can increase the interest rates. In case of new transactions, interest rates can increase only after the first year. Also the credit card issuer will have to give 45 days' advance notice of the change.
- Due dates and times: Credit card issuers cannot set arbitrary deadlines for payments. Early morning due dates should be avoided by the credit card issuers.
- Highest interest balances paid first: Cards with highest interest rates should be paid first or divided on a proportional basis. Right now card issuers apply all amounts over the minimum monthly payments to the lowest-interest balances first.
- Over-the-limit fees: If the consumers exceed their credit card limits, over-the-limit fees would be prohibited.
- Double-cycle billing prohibited: Outstanding credit card balances would be computed based on purchases made in the current cycle. Going back to the previous billing cycle to calculate interest charges will be prohibited.
- Foreign transaction fees: Fees charged for purchasing goods outside United States would have to be disclosed in a table on credit card applications and solicitations.
- Disclosure of Credit terms: The terms and conditions of the Credit card should be clearly known to the consumers. Credit card issuers should disclose the consequences of making minimum payments each month to the consumers. Credit card issuers should make the consumers aware of terms like "how to avoid interest" or "fixed rate”.
- Credit offers: Credit Card issuers should disclose the factors that will determine the interest rates or credit limits that the consumers will receive. This will make them aware as to when they would have to pay a higher interest rate.
- People with bad credit: With the new credit card rules coming up, the credit card issuers will have to do away with fee harvesting (Credit card fees which nearly equals the credit limit the issuer has given you). Moreover, the fees that exceed 25% of the available credit limit must be spread over the first six months of card use.