Review the Credit Card Holder Bill of Rights Act and other free credit card tips for getting the best deal and advice on managing accounts.
Last month, the Federal Reserve Board along with the Office of Thrift Supervision and the National Credit Union Adminstration announced new rules that would eliminate many predatory pratices in the credit industry. The rules, named the Credit Cardholder's Bill of Rights Act of 2008, would amend three existing consumer credit laws:
- The FTC Act
- The Truth in Lending Act
- The Truth in Savings Act
Last December the Federal Reserve voted to end many unfair credit card practices, and here are highlights of the rule changes (some of these rules do not take effect until 2010):
Stricter Finance Charge and Interest Rate Increase Rules
- No more double cycle billing finance charges. Credit card issuers are prohibited from calculating finance charges using this method which causes cardholders to pay interest on previously paid balances.
- No interest rate increases during the first 12 months of opening a credit card, unless the rate increase was disclosed when you first opened the credit card.
- No interest rate increases on pre-existing balances. If your credit card issuer decides to increase your interest rate, that new rate would only apply to new balances. Your current balance would continue to be subject to the old interest rate.
- Credit card issuers must give a 45-day advanced notice before increasing your interest rate. This is a big increase over the current 15-day advanced notice requirement. Your interest rate could increase if you don't make the minimum payment within 30 days of your due date, even during the first 12 months of opening your account. You must receive a 45-day advanced notice of penalty rate increases.
Payment Allocation
- Payments above the minimum must be applied to highest-interest rate balances.. If you have balances with different interest rates, the new rules require banks to allocate anything over the minimum payment to your highest interest rate balance. This reduces the amount of finance charges you pay on balances.
Limited Fees for Subprime Credit Cards
- Limits on fees for subprime credit cards. During the first year of a credit card, banks cannot charge fees that exceed 50% of the credit limit. Only 25% of the fees can be charged when the account is first opened. Any additional fees must be spread over at least five billing cycles.
Billing Statements and Payment Processing
- Billing statements must be sent 21 days before the due date, giving you more time to pay your credit card bill and reducing the risk of a late fee and interest rate penalty. Mailed credit card payments received by 5 pm on the due date are on time. This keeps credit card companies from stipulating a 11:00 am due time that would make your payment late if the mail doesn't get there until 3:00 pm. Payments are on time when received the next business day after a holiday or weekend (when the credit card company doesn't accept payment on those days). If your due date falls on a weekend and your card issuer receives your payment on the following Monday, your payment would still be considered on time. The same thing applies to due dates that fall on holidays.
More Detailed Disclosures
- Credit card issuers are required to simplify credit card disclosures. The use of tables and bold text will be used to emphasize key information on credit card disclosures. Credit card issuers will be required to disclose the duration of penalty interest rates, simplify information about variable interest rates, and detail when grace periods do and do not apply.
Billing statements must make it easier to understand interest charges and fees charged by listing the following:
- Year-to-date totals of interest and fees
- Interest charges by the type of transaction, e.g. purchases, cash advance, or balance transfer
- Details and definition of the effective APR
- The effect of minimum-only payments including total repayment time
Reporting Overdraft Charges
- All bank statements must report the total amount of overdraft charges and returned items fees for the current statement period and year-to-date. Banks who report a current balance, like through an ATM, must report a balance that doesn't include overdraft charges.
When your rights are violated by a business in the credit industry - whether it's bank, credit bureau, collection agency, or credit repair company, send complaints to the Federal Trade Commission
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