It is a good day for consumers as important components of the "CARD" legislation have gone into effect. As of today, February 22nd, all credit card companies must do the following:
- Keep all due dates the same on your credit card: Now you can better plan for your credit card payments each month without fear of being late because they have arbitrarily changed the grace period.
- Provide you 45 days notice before they raise rates: While there are no limits as to how high the rates can go and they can still jack up your interest rates, at least you now have much more time to prepare for these rate increases.
- Younger adults under the age of 21 will find it much harder to obtain a credit card: I used to have a portion of my workshop for college freshmen that cautioned them against credit card companies that solicited their business... that practice will severely be limited because of this age restriction.
- No more double cycle billing: Card companies used to be able to charge interest on a debt that had already been paid in a previous month. As wrong as this practice was it was legal... not anymore.
- No more over limit fee transactions unless previously approved: If you have a500 limit and charged505 there used to be a fee for going over your limit. You must now give consent to make this possible and issuers cannot charge more than one of these fees per billing cycle.
- No more paying to pay: This is huge because the credit card companies took advantage of the ease of which you can pay your debt if you use the internet or phone to pay your debt. It never made sense to me to have to pay a fee just to pay my debt... this practice is now over.
- Longer notice: Companies were required to send statements 14 days in advance; they are now required to send statements 21 days before a payment is due.
That being said, I want to reveal a piece of groundbreaking news to you that might floor you so make sure that you are sitting down before you read this next statement. The news is: Credit card companies like to make money!
Did I shock you?
Of course I am being facetious but the bottom line is peoples always seem to be shocked when they find out that credit card companies are lobbying, bending rules, and manipulating as many people as possible to increase their bottom line. These rules still leave a lot of loopholes that you can be sure the credit card companies will try to exploit. They are not in the business of making payments easy for you, but to make as much money as possible. Therefore, these rules do not negate the need for personal responsibility. It is preposterous that people have items piling up in their garage collecting dust that they don't use but they are still paying for on their credit cards! If it is not an emergency (no a new video game system for a crying child who feels he deserves it is not an emergency) or you are not using the card to establish credit history (i.e. making payments at the grocery store with a credit card and paying it off within the week to establish a good history of timely payments) then DO NOT use your credit card.
An individual who uses a credit card will spend 35% more at the time of purchase. The average purchase costs 112% more when using a credit card verses using cash after you factor the interest rates and other fees. The credit card companies, who could give a darn about your personal financial situation, are steadily trying to find ways to get into your pocket... let's not make it easy for them and start planning and using credit cards wisely.