How You Stand To Benefit From The New Credit Card Rules Passed By Congress

The first phase of a new credit card law took effect yesterday (August 20), and it changes how credit card companies can act with regard to increases in interest rates charged to consumers, over-the-limit and late-payment fees and other credit matters.

The Credit Card Accountability, Responsibility and Disclosure Act was passed in an effort to offer protection to millions of American credit card holders. If you’re one such person, here are some of the ways that you stand to benefit from this you act.

1. Longer billing periods. Banks / credit card companies must mail your statement at least three weeks before your payment is due (this will help to reduce the chance of a late fee or a late payment on your credit report)
2. Notification of higher interest rates, changes to the way finance charges are calculated and the effect of late payments on your other credit card rates. Card issuers must provide a 45-day written notice before increasing your interest rate. The card holder can decline the increase by closing their account, and they must be allowed to pay off any balance — at the old rate — within 5 years. Be careful though, should you choose this option; the card issuer is permitted to double your minimum payment.
3. New limits to the amount of, and terms under which, credit is issued to teens and young adults. Applicants under age 21 must have a co-signer or prove they (not their parents) can make the payments. This will help keep students from graduating with a degree and a humongous credit card balance.
4. Card holder approval required before processing a transaction that would put the card holder over their credit limit. Credit card companies can no longer charge an “over-the-limit fee” — unless you give them permission to allow charges that would actually put you over your limit.
5. Payments made above the minimum are to be applied to your highest-rate balance. If your balance is subject to different interest rates, any payment above the minimum must be applied first to the balance with the highest rate.
6. Provision of information (by the bank or credit card company) about how long it would take to pay off the balance when making only minimum payments

Note though, even under the new law, card holders should carefully consider both the costs and benefits of using credit cards.