Now that most of the Credit Card Act has been
implemented, it may be a good time for a review
its important provisions.  Here are the most
important rule changes you need to know.  

The Banks must give the consumer 45 days notice for
most changes related to the account. Typical changes
would be a change in the interest rate, credit limit, and
changing fees, terms, etc. If they are making changes
to the terms of the contract, they must give you the
right to opt out of it, cancel the card, and allow up to
five years to pay off the balance.  If the interest rate on
your account is changing, it is applied only to new
purchases in the account.

If you have different balances within an account for
purchases, cash advances, transfers, etc., then the
bank must use a given payment to pay off the high
interest categories of the account first. They should
then work their way down to the next lowest interest
category and then the next, and so on. In this way your
total balance is paid off more quickly than if the
payment was otherwise applied, and the total interest
charges will be lower.  

The bank must inform how long it would take you to
pay off your balance if you make only the minimum
payment. It must also tell what payment you will need
to make to pay off your balance in 3 years. Of course,
if you make the minimum payments it likely take quite
a bit longer than three years to pay off your balance.
And your total interest charges will be higher. So this
illustration will highlight the benefit of making larger
than minimum payments to the consumer.   

There are now more limited ways in which an
individual can go over their credit limit and what fees
can be charged for doing so. First, the bank cannot
allow a cardholder to go overt their limit unless the
cardholder asks and/or approves going over the limit.
If they do go over the limit in this way the bank can
only charge an over the limit fee once per month – not
each time a transaction is made once the balance is
over the limit. The over limit penalty fee cannot be
more than the amount the cardholder went over the
limit, among other limitations.

Overall penalty fees are more restricted than in the
past. In most cases, under the new rules a late
payment penalty fee can only be up to $25 unless you
have been late on a payment within the last six
months. If so, the fee can be up to $35. In addition,
your credit card company cannot charge a late
payment fee that is greater than your minimum
payment. So, if your minimum payment is $20, your
late payment fee can't be more than $20. Similarly, if
you exceed your credit limit by $5, you can't be
charged an over-the-limit fee of more than $5.

There also must be a notification that a late fee will be
imposed and the amount it will be if payment is not
made by a certain date.

There can be no change to the interest rate for a new
card within the first twelve months of issuance. There
are a few exceptions: If it is a variable interest rate
card, in which case the rate can vary according to the
indices with which the rate is tied.  Or if it is a card
with an initial low or zero rate, then the rate can be
adjusted after six months to the standard rate
disclosed at time of sign-up. Or if you are more than
60 days late with a payment or delinquent with other

So called double cycle billing, which is a way the
banks charged on high balances in two different
periods, even if the balance was reached in only one
period, is no longer allowed. There are also
restrictions on upfront charges on sub-prime cards
and marketing cards to those under 21.

Keep in mind most of these rule changes do not apply
to credit cards issued to businesses.  

Overall, these changes should help the consumer
manage their credit more wisely and inexpensively.
However, keep in mind that banks may increase costs
in other ways, such as increased annual fees, to try to
make up the revenue. They have also claimed they
may have to restrict credit because they cannot fully
charge for the risk that they are taking.   

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How to Handle Your Credit Cards: Top  
Ways the Credit Card Act Affects You.
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