New Credit Card Rules - UNIVERSAL DEFAULT ELIMINATED
New Credit Card Rules May Benefit Customers
Credit Cards are convenient and may some benefits. I do enjoy frequent flier miles but there are pitfalls you need to know.
The current state of affairs in the financial world has made life less credit card friendly. Those customers that make even one error in payment are falling victim to extreme credit card limit reductions, changes in due dates and fees, and fees, and fees.
I have heard horror stories of credit limits being cut from $30,K to $1,K because of a late payment. I have heard of cards being closed due to non use. You may say, so what? Well, your credit score may be in jeopardy. You are probably familiar with your debt to income ratio, well there is a debt to available credit ratio too. Say you had a $30,000 limit on your card but then they chop your limit down to $1,000 and you have a balance of $700. Do the math, your new ratio drops from an excellent position of 3.33% to a poor position of 70% all because you made one late payment and this will drop your credit score numbers.
As I have written in previous blogs, not only is it more difficult to qualify for loans but they are more expensive if you have lower credit scores. But that is not where it stops. You need to protect your credit scores like you protect your family. If you are dragging around low credit scores almost everything can be affected, from mortgage rates to insurance premiums, to credit card rates, to car loan rates, you name it, it will cost more with lower credit scores.
All is not lost, Congress recently passed new rules regulating the credit card companies. The new rules will take effect in July 2010. These new rules will help clarify the terms of your credit card and benefit you, the user.
1) Currently credit card companies can raise interest rates just about whenever they want to. New, increases only on a new credit card or advance, rather than on existing balances. Why is this good? This eliminates industry practices like retroactive rate increases on existing balances.
2) Currently, CC companies apply your monthly payment towards the outstanding balance with the lowest interest rate. New, CC companies will be required to apply any payment above the minimum to the part of the balance with the highest interest rate. You will be able to save money by paying down balances with higher interest rates faster.
3) New, you will be given at least a 45 day notice before any changes are made to the terms of your account.
4) Late fees will be easier to avoid. New, CC companies must now provide at least 21 days for you to make payments after the statements are mailed.
5) AND THIS IS THE BIGGIE! UNIVERSAL DEFAULT POLICIES TO BE ELIMINATED! Current default policies allow the CC companies to raise rates based on your history with other creditors. So if you make a late payment or go over your limit with say, Bank of America then Citi card can raise your interest rate. New, if you make a late payment for one CC it will no longer affect every CC you own. And the CC companies will be unable to raise the rate on your existing balance unless your payment is more than 30 days late.
All of the changes are designed to help credit card users pay off their debt more easily and allow for more flexibility with out being penalized. Finally a little help!
Credit Cards are convenient and may some benefits. I do enjoy frequent flier miles but there are pitfalls you need to know.
The current state of affairs in the financial world has made life less credit card friendly. Those customers that make even one error in payment are falling victim to extreme credit card limit reductions, changes in due dates and fees, and fees, and fees.
I have heard horror stories of credit limits being cut from $30,K to $1,K because of a late payment. I have heard of cards being closed due to non use. You may say, so what? Well, your credit score may be in jeopardy. You are probably familiar with your debt to income ratio, well there is a debt to available credit ratio too. Say you had a $30,000 limit on your card but then they chop your limit down to $1,000 and you have a balance of $700. Do the math, your new ratio drops from an excellent position of 3.33% to a poor position of 70% all because you made one late payment and this will drop your credit score numbers.
As I have written in previous blogs, not only is it more difficult to qualify for loans but they are more expensive if you have lower credit scores. But that is not where it stops. You need to protect your credit scores like you protect your family. If you are dragging around low credit scores almost everything can be affected, from mortgage rates to insurance premiums, to credit card rates, to car loan rates, you name it, it will cost more with lower credit scores.
All is not lost, Congress recently passed new rules regulating the credit card companies. The new rules will take effect in July 2010. These new rules will help clarify the terms of your credit card and benefit you, the user.
1) Currently credit card companies can raise interest rates just about whenever they want to. New, increases only on a new credit card or advance, rather than on existing balances. Why is this good? This eliminates industry practices like retroactive rate increases on existing balances.
2) Currently, CC companies apply your monthly payment towards the outstanding balance with the lowest interest rate. New, CC companies will be required to apply any payment above the minimum to the part of the balance with the highest interest rate. You will be able to save money by paying down balances with higher interest rates faster.
3) New, you will be given at least a 45 day notice before any changes are made to the terms of your account.
4) Late fees will be easier to avoid. New, CC companies must now provide at least 21 days for you to make payments after the statements are mailed.
5) AND THIS IS THE BIGGIE! UNIVERSAL DEFAULT POLICIES TO BE ELIMINATED! Current default policies allow the CC companies to raise rates based on your history with other creditors. So if you make a late payment or go over your limit with say, Bank of America then Citi card can raise your interest rate. New, if you make a late payment for one CC it will no longer affect every CC you own. And the CC companies will be unable to raise the rate on your existing balance unless your payment is more than 30 days late.
All of the changes are designed to help credit card users pay off their debt more easily and allow for more flexibility with out being penalized. Finally a little help!
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