Congress sent credit card legislation today to President Obama, who is expected to sign it this week. The bill aims to set rules for credit card issuers that would benefit the average credit card holder.
Here is a summary of what proposed changes the House and Senate have come up with:
Better Rules Disclosure: Credit card agreements will be posted online so you can refer to them at your leisure, instead of wishing you didn’t throw them away with the junk mail.
Improved Balance Due Clarity: Companies would have to disclose to you how long it would take to pay off your balance if you made only the minimum monthly payments. They’d also have to disclose how much in interest you’d end up paying if you only made minimum payments.
More Time for Monthly Payments: Credit card issuers would be required to give you a “reasonable” amount of time to pay your bill, say 21 days, before bill payment is considered late.
Limited Fees: Over-the-limit fees would not be allowed unless you express to your lender that you want to be able to go over your limit. In other words, you cannot unknowingly go over your limit and incur a charge. The legislation also prevents companies from issuing a charge for paying a bill by phone.
More Notice on APR Increases: Currently, credit card companies don’t give much notice when they plan to increase the annual percentage rate, which is the interest you pay on your credit card balance. Now credit card companies will be required to give at least 45 days notice before interest rates are increased. Even more, they won't be able to raise your rate unless you miss payments or otherwise fail to comply with your agreement.
Limited Retroactive Rate Increases: This legislation would also prohibit companies from applying rate increases retroactively unless you’re at least 60 days behind on your payments.
Appreciation for Good Behavior: If your credit card interest rate is increased due to a delinquency or default, but you pay your bills on time for six months, your previous lower rate must be restored.
Elimination of Universal Default: Currently, some credit cards may raise your interest rate to their default interest rate if you’re delinquent or you default on a card issued by another company. Legislators are proposing a ban on this practice.
Elimination of Double-Cycle Billing: Currently, you’re spared finance charges when you pay your balance in full, but when you go from paying your balance in full to carrying a balance, your previous month’s balance is used in calculating your finance charges, even though that amount was paid off. This is a policy known as double-cycle billing. According to the American Bankers Association (which opposes the legislation), many credit card companies have eliminated this practice because it’s a turnoff for consumers, but pending rules would make sure no credit card companies use this practice.
Protection for Cardholders Under 21: Pending legislation would require prospective cardholders under 21 to show proof they can pay off their credit card debt or require a parent or guardian to co-sign and promise to pay off the debt if their child defaults.
Retained Gift Card Validity: Credit card-branded gift cards would be required to remain valid for at least five years. All information about dormancy fees (money charged against a gift card when it goes unused for a period of time) must be printed on the gift card itself.
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