New credit card rules

You’ve probably gotten lots of letters in the mail from your credit card company throughout 2010, as they implement new rules. If you threw out your fine print statements or were confused after reading the first few lines, here’s a breakdown of the phased-in credit card rule changes.

Late Fees
Your minimum balance will be used to calculate your late fee. If your minimum balance due is $10, your late fee will be $10.

You can’t be charged more than a $25 late fee UNLESS 1 of your last 6 payments was late and in that case the fee can’t be more than $35. You may also pay more than $25 if the credit card company can show that your late fees caused the company to incur costs that justify a higher late fee.

Rules for exceeding your credit limit
If you go over your credit limit, a similar rule for the fees that can be charged applies. The amount you go over will match your fee. If you exceed your credit limit by $15, you will be charged a $15 fee. You will only be charged one fee.

You’ll never get these fees charged unless you tell your credit card company that you want over the credit limit protection. Otherwise, the charge will be denied. If a charge mistakenly goes through and you did not opt-in to this protection, you won’t be responsible for the fees.

Inactivity Fee
The credit card company can’t charge you an inactivity fee. What I’m hearing from consumers is, that the companies are now just cancelling consumer cards if they don’t use them.

Make sure if you get one of these cancellation notices, that you charge something on the card if it’s your oldest card. This card is important to your credit history, and you should not cancel it. It’s tough to avoid especially when you are upset with the credit card company and you want to cancel it out of principle. Think long and hard if it’s a card that you’ve had the longest.

1 Fee per transaction
The companies can now only charge you one fee per event or transaction that violates your cardholder agreement.

45 day notice of changes
If the card company is increasing your interest rate, change the fees it charges, or switching the terms of your card you must be notified 45 days before these new rules take effect.

You’re also given the option to cancel your card if you don’t like the changes. If you have a balance owing at the time of cancellation, the card company can give you just five years to pay it off. They can also double the percentage of your balance that is used to calculate your minimum payment. In essence, this would accelerate your re-payment timeframe.

Cancellation is a knee jerk reaction for many consumers when their card company makes a change they don’t like. Remember, don’t cancel your oldest card because your credit card history impacts your credit report. The longer your history the better your score.

The card company does not have to give you a notice if your introductory rate is expiring, you violated the terms of a workout agreement, or you have a variable rate tied to an index.

APR
If your APR is raised, the card company must tell you why. Then, your card’s APR must be re-evaluated every six months. If the rate is going to be reduced as a result of that evaluation, that must happen within 45 days.

Payoff explained
credit card statements now have a payoff grid that clearly explains how long it will take you to pay off your debt if you only make the minimum payment. THis change is supposed to make it more obvious to consumers that they are paying a hefty price if they only make the minimum payment each month.

If you pay more than the minimum balance and still have monies that are due, your excess payment will be credited toward the balance with the highest interest.
Like everything else, there is an exception, but this one actually helps consumers. If you made a purchase under a deferred interest plan or no interest if paid by a certain date plan, you are allowed to choose if you want the excess money to go toward the zero interest balance first.

Due dates
You will now be given more time to pay your bill. The card company must mail your bill 21 days before your due date. Your due date will also remain the same each month.

If your payment is due on a weekend or holiday, you may not be late if you make your payment by the following business day. Note, the words “may not” be late. I’m hearing reports from consumers that they are being charged late fees when they’re making their payment the next business day after a holiday or weekend. That’s because there is an important exception to this rule. It says this rule only works IF the card company does not process payments on that weekend or holiday.

As a general rule, make your payment a few days early to account for any problems and to avoid late fees. These days, it’s harder to afford those fees plus it can impact your credit. With credit standards so much more restrictive, the last thing you need is an avoidable mistake on your record.

New credit card rules
If you open a new credit card, your interest rate can’t change for 12 months. There are some exceptions. The rate can increase if it has a variable interest rate tied to an index, if there is an introductory rate that you agreed to it must last for six months, if you are more than 60 days late paying your bill, if you are on a workout agreement and don’t meet the payment guidelines.

If you meet one of these exceptions, the new rate will only impact new charges.

Annual and application fees
If you have to pay an annual fee or application fee, it can’t be more than 25% of your initial credit limit.

Underage consumers
The new laws also protect college aged students. You can’t open a credit card if you are under 21, unless you can show that you can financially make the payments or you have a co-signer.

Once you open the card, if you want to increase the credit limit you have to get permission from your co-signer.

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7 responses to “New credit card rules

  1. Pingback: Federal Reserve wants to cut interchange fees 70%+ | Jenn Strathman

  2. Pingback: One year later: Life after new credit card rules | Jenn Strathman

  3. Helen Montgomery

    I made the mistake of applying for an Amazon Chase card which had an incentive that wasn’t even that great: 3 points for each dollar spent at Az and $40 gift card. It was a Chase Card Visa and I already have a Chase MC.
    They gave me the new card but it has an 18.24% interest rate and only $1900 credit limit

    My old card had an $18,000 credit limit with a 12% rate.
    As of Tues my old card now has a credit limit of $5000. I called about this because although I NEVER have gone that high on charges, what if I had, and didn’t know the rate had been lowered. I was told they SENT a LETTER on Tues, May 10, the same day they changed the rate.
    Can they do this? I actually did buy a car using an insurance check but put part of it on the Chase card. Luckily it was well below $5000 but what if it had been higher?
    I only found out about this change because I was checking my account online and the change was shown the re, but no email, phone call or letter has yet reached me about it. This is Thurs. May 7.

    • Interesting..if you went over the limit it wouldn’t have been approved. Also, many cards limited balances a few years ago but I’ve seen gradual increases. It’s probably because your debt to credit ratio got too close. Also, opening another card — thus increasing your credit and in their terms your credit risk — could have prompted the change. They have to give you a certain amount of notice, but often the clock starts ticking when they send the letter giving you little time to adjust. I’d suggest calling the company, and asking for an explanation. Ask for a manager. If you are thinking about switching to another card, tell them that. Nobody wants to lose a customer. Ask if they’ll reconsider in six months. Finally, read the letter they sent you. There should be some fine print about your consumer rights. Take those steps under the law. I hope this helps.

  4. Helen Montgomery

    Thanks Jean. I have called them and emailed them, and received several replies. They sent a letter the same day they changed my limit.I haven’t received it yet, I only found out accidentally as I was on the website.

    So what happened to the 45 days notice.?They say they changed it because I don’t use the extra credit anyway.. so what was the big rush? and the change was because they check Equifax every 6 mos. I just got my own Equifax on April 22. My debt is 8% of my credit, or it was.

    None of their replies answers the question, why change my credit limit? why now? (I’ve had the same credit limit for over 10 years and never used more than about 1/5 of it), and why not give me notice BEFORE they did it?

  5. Helen Montgomery

    I should add that the card in question is Chase Freedom Rewards

  6. Pingback: Credit card fees still changing | Jenn Strathman

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