Credit Cards: 4 More Consumer-friendly Provisions in the New Law
Do you read the fine print on your credit card bill? Did you read the fine print when you accepted the credit card in the first place?
If you’re like most people, you didn’t. You probably noticed that the interest rate charged on purchases is different from the rate on cash advances. Sometimes the cash advance came with a low promotional fee, so it was charged at a rate such as 5.9% while purchases remained at 12.9% or even higher.
Unless you did read the fine print, you probably didn’t notice that your payments all went toward paying down the lower interest balance, rather than being allocated proportionately between them or applied to the higher interest balance.
Under the new Credit Cardholder’s Bill of Rights, that will change. Your minimum payment will still be allocated to the lowest interest rate balance, but any amounts you pay above the minimum will be credited toward your high interest balance. So if you accidentally use the wrong card and charge $50 in high interest purchases on a card that you planned on only using for cash advances, you can hurry and pay $50 over your minimum payment to get rid of the high interest.
The new law also bans a practice that you probably didn’t realize was being done. This practice, known as double-cycle billing, based your finance charges on the average balance of both the current and the previous month’s balance. So even if you made a large payment and brought your balance down considerably, you’d still be paying interest on that paid debt the next month.
A third consumer-friendly provision goes into effect in just two months – in August 2009. This provision requires credit card issuers to mail your statement 21 days in advance of your due date, as opposed to the current 14 days. The shorter time frame was causing many consumers to receive their statements too late to write a check and return it in time for it to get back to the card issuer before the due date.
Gift cards will also be regulated under the new laws. Beginning in August 2010, all gift cards must be valid for at least 5 years – allowing consumers plenty of time to use them. Also, while at present the issuer can assess inactivity fees if the card is not used for a short time, they will now not be permitted to assess such fees unless the card has gone unused for 12 months.
