New Credit Card Rules Coming into Effect July 2010

It was recently announced that Federal regulators have imposed new rules on credit card companies that are aimed at helping credit card holders. Regulators are finally recognizing and acting on the fact that consumers are suffering under the thumb of extraordinary credit card fees and unreasonable grace periods (usually no grace period) when it comes to late payments on credit cards. Here are a few details about the new changes that are set to take effect in July 2010.

Cap on Interest Rates on Current Balances

The most important aspect of these new credit card rules is that credit card companies will no longer be able to raise the interest rates on your existing balances after July 2010. So that means that if you have a 10% interest rate credit card balance before July 2010, the company cannot arbitrarily raise your interest rate to 18% for whatever reason they deem is appropriate. It is not yet 100% clear from reports whether that means they cannot ever raise your rates, even if you default consistently, but it sure looks that way. Credit card companies will only be able to raise your interest rates on new balances and charges accrued after July 2010.

No More Allocating all Payments to Lowest Rate Balances

Over the past few years many people have been shocked to learn that credit card companies have been allocating their entire monthly payment to only the lowest interest rate balances. So you can have one balance at 3.99% but yet another at 24.99% and only the 3.99% balance is going down. Meanwhile, the balance at the higher 24.99% interest rate is growing and growing in leaps and bounds. Years from now when you finally pay off that 3.99% balance, you will have a new hefty balance at 24.99% to start paying off. Just great!

These new credit card rules would make this questionable practice illegal. Now, any payment over the minimum would have to be applied to the highest interest rate balance.

Better Grace Periods for Payments

Credit cards are just about the only debt account where you don't receive a grace period to pay without late fees. If you pay your credit card bill even 1 hour late, you are charged hefty fines of $30 or more, and you can even lose your low interest rate offers. This new law would make credit card companies give you a reasonable period of time to pay before it is deemed as "late." It's about time.

These seem to be the most significant changes, but here are a few other benefits to consumers from these new credit card rules :

- Lower fees when you exceed the credit limit of your card due to a hold on your account

- No more double-cycle billing

- No more security deposits and excess fees for issuing credit or making credit available

- Goodbye to deceptive credit card offers

- Fees for subprime credit cards capped at 50% of the credit limit

All that I can say in response to these new credit card rules is, thank you! My only complaint about these new rules is that they aren't going into effect tomorrow! It's about time credit card companies were held more responsible to their long time customers and for more reasonable practices. Because really, that's what credit card holders are, customers. When you pay someone hundreds and thousands of dollars every year to use their product (in this case money) that is definitely a customer situation. So it's about time for some customer appreciation!

Next in line? Hopefully regular banks and their excessive overdraft and account maintenance fees.

Source: Associated Press "Regulators adopt new credit card rules" http://www.google.com/hostednews/ap/article/ALeqM5gUaC-canALwb8SUTCxDm3shnk1YAD9555QUO0

Source: MSN Money Staff "Feds ban 'unfair' credit card rules" http://articles.moneycentral.msn.com/Banking/CreditCardSmarts/feds-ban-unfair-credit-card-rules.aspx