Obama’s Credit Card Reform Act goes into effect this February, offering consumers with credit card debt a little relief in a faltering economy.
February 2010 is the effective date for a new set of laws that hope to govern credit card issuers more closely and eliminate some of the trickery that gets Americans into deeper debt. If you already have existing credit card debt, this is good news for you and here are some of the new changes you can expect to see:
Interest Rates
Card holders will be protected from interest rate hikes on money that they currently owe for the next five years. If a bank decides to increase its rates, it must provide a 45 day written notice and once the new APR goes into effect, it can only be applied to new purchases made on your card.
The new credit card reform does not cap interest rates in general, but it does hold banks more responsible.
Payments
Any payment made on your card over the required minimum will now always be applied toward the balance with the highest interest rate to help you eliminate that debt first. Card issuers are also required under the new credit card reform to provide at least 21 days after you receive your statement before a payment is due.
The Reform Act also dictates that banks make it easier for you to pay – this means eliminating fees for payment by phone or internet and also by making deadlines reasonable (the due date will end at midnight rather than 5:00pm).
Statements
You will notice some changes on your credit card statements that will be helpful in making future purchasing decisions. Your bill will now provide a timeline for how long it will take to get out of debt based on your current payments or the minimum payment each month. You will know how much that you must pay in order to be debt free in 12 months, 24 months, etc.
Statements will also disclose exactly how much interest you are paying each month, rather than obscuring it which is common with some credit cards now. Once again, you will have at least 21 days to make a payment after receiving your bill.
New Cards
Students and young people applying for credit will be given closer scrutiny and may be required to have a parent or someone with proof of sufficient funds to co-sign before they are issued a new line of credit.
The new Credit Card Reform Bill should help consumers to make smarter choices and help to eliminate some debt, but keep in mind that if you are late more than 60 days when making a payment, you forfeit the new protection this reform offers – so pay on time!
Keep a close eye on your future statements leading up to the reform taking effect, some banks are already guilty of hiking interest rates in preparation for the changes.
Greg Rodgers is a full time freelance writer covering the new Credit Card Reform Bill.
Article Source: What the new Credit Card Reform Bill means for you
