Consumers set for a win on credit card rates
May 21, 2009 by admin
The ongoing battle between consumers and the credit card industry is likely to see another subtle victory on the side of consumers. New legislation aimed at helping to protect consumers from unnecessary hikes to their interest rates is about to become law as Congress has signed off on the new bill and it will be heading to President Obama to become law.
Consumer groups have been clamoring for addition protection for credit card holders, as more Americans lose their jobs and struggle with their personal finances. The advocacy groups point to the billions that taxpayers are lending some of the worlds largest banks, who happen to be the same institutions that finance a majority of the credit card debt and working to leverage this with lawmakers at a time when more banking regulatory reform is clearly forthcoming. The new proposals to help regulate the credit card industry will help to protect consumers from unexpected rate increases with their credit cards and outrageous fees from the practice off paying down the lowest rates at the credit card issuers discretion. Key highlights of the pending law:
• Interest rates are fixed for the first year the card is issued
• Companies are prohibited from raising rates on existing loan balances unless a payment is over sixty days past due
• Payments received by 5pm must be credited to the account on the day received
• Consumers under the age of 21 must have a cosigner or prove their financial independence
• Credit card bills must indicate the length of time to pay off a balance if the minimum payments are made
• 45 days notice is required to implement a rate increase
• Elimination of most over the limit fees charged by credit card companies
The credit card reforms come at a time when consumer finances are under great strain. Last year the federal reserve moved to implement credit card reforms as consumer groups have been adament that the practice of card companies paying off a customers lowest balance first is extremely harmful to consumers. The national unemployment rates is closing in on ten percent, which is likely to indicate further charge off losses for credit card companies as more consumers are likely to find themselves filing for bankruptcy. The new laws will likely result in higher median interest rates for most consumers, as banks look to recoup the lost revenues in other areas. Consumers with good to excellent credit should discuss their rate and terms with their existing card companies prior to electing new credit cards, as often times your existing credit card company may be willing to negotiate more favorable rates and terms if you are a good customer, rather than risk losing your business to a different bank. The credit card reforms are a small step against a giant industry and will allow banks and credit card companies up to nine months to become compliant.