New credit card rules are now law
by Tim Manni
As expected, President Obama today signed into law a slew of new rules and limits on credit-card issuers:
Under the bill, credit-card companies will have to take several steps, including posting their credit rules on the Internet and giving cardholders a written statement explaining pending interest-rate hikes 45 days in advance.
Credit-card companies won’t be able to increase interest rates on existing balances except in limited circumstances, such as the expiration of a promotional rate or failure by a customer to make a payment within 30 days of the due date.
The new law, which takes effect in January, includes other restrictions on credit-card practices, including a ban on charging interest on balances that already had been paid and a prohibition on issuing cards to children.
It also bans the “universal default” practice, in which defaulting on — or, in some cases, just being late with — a payment spurs your other credit-card banks to hike the rate on their card as well. These are universally loathed practices, and you’d be hard-pressed to find a credit-card user who hasn’t been hit by at least one of them. (We also like the part that says that you, the user, must approve any transaction that exceeds your credit limit.)
However, this doesn’t come without cost, in a very real sense. For starters, not everyone who used to qualify for a credit card can now get one. (We see that, by and large, as a good thing.) However, since banks will now see a lot less revenue from practices they once enjoyed, they’ll be looking to make it up elsewhere from “convenience” users — those who pay off their balance each month. The possibilities include annual fees, fewer ‘rewards’ goodies, and, perhaps, getting charged with interest from the day you use the card.
Those of us getting what the card issuers call a “free ride” don’t think much of essentially subsidizing the less responsible. According to USA Today, “About 90 million households carry credit cards, with an average debt load of more than $10,500, according to CardTrak.com.”
If you’re a “free rider,” there unfortunately isn’t much you can do about it. The experts say you shouldn’t just cancel your cards in pique, but instead put ‘em away only for emergencies. In lieu of carrying cash, think “debit card.”
