Monday, June 22, 2009

New Rules!


By: Karen Saley
Extension Specialist

Have you ever wondered what all that fine print on your credit card statement says? Well, it actually says a lot, and you would be wise to read it. All that verbiage has been a source of frustration for consumers and a source of revenue for the credit card companies.

Contained in all that fine print are the terms and conditions related to your credit card. Unfortunately these terms are written in such a confusing manner that most people have a difficult time understanding them. This has made it very easy for credit card companies to implement some interesting money making strategies.

That will all be changing next year. The Federal Reserve has put a stop to some pretty shady practices on the part of the credit card industry by adopting some new rules that will help protect consumers.

What will the new rules do for consumers?

• Protect consumers from unexpected interest charges, including increases in the rate during the first year after account opening, unless it is stated up-front when the account is opened.

• Prohibit credit card companies from raising interest rates on money already borrowed unless it was borrowed on a variable rate card, or the minimum payment is made more than 30 day late.

• Forbid banks from imposing interest charges using the "two-cycle" billing method. This method charges interest on amounts already repaid.

• Require that consumers receive a reasonable amount of time to make their credit card payments. A late fee cannot be imposed if the bill was mailed less than 21 days before the due date.

• Prohibit the use of payment allocation methods that unfairly maximize interest charges. Payments must be allocated fairly among credit cards with different interest rates.

• Address subprime credit cards by limiting the fees that reduce the amount of available credit.

Remember, these rules will not be put in place until July 1, 2010. In the mean time take a few minutes and read that fine print. The credit card companies will be trying to maximize their profits while they can.


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Company and product listings do not represent endorsement by either: Pinellas County Extension, Pinellas County or the University of Florida / Institute of Food and Agricultural Sciences.