Major Changes to Credit Card Rules

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The Federal Reserve voted on December 18 to approve rules that would reform several unfair practices within the credit card industry. Some of the rules include:

· No interest rate increases during the first year of opening an account, unless the interest rate increase was disclosed when you opened the account. You can enjoy your interest rate for a full 12 months without having your credit card issuer increase your interest rate. The exception is when the lender told you your rate would increase when you opened your account. For example, you knowingly signed up for a credit card with a 6-month promotional rate.

· No interest rate charges on pre-existing credit card balances. If your interest rate increases, you can continue to pay your current balance at the lower interest rate. Only charges made after the interest rate increase will have the new interest rate.

· Credit card issuers must give a 45-day notice before increasing your interest rate. This is a drastic change over the current 15-day advance notice time period. The 45-day advanced-noticed includes penalty rate increases.

· Your minimum payment can be increased if you don’t make the minimum payment within 30 days of the due date.

· No more double billing cycle finance charges in which credit card issuers calculate your finance charge using an average of the current and previous month’s average daily balances. Under this method, you would end up paying interest on balances you’d already paid.

· Subprime credit cards can no longer charge fees that exceed 50% of the credit limit. Furthermore, the fees charged when the credit card is first opened can’t exceed 25% of the credit limit. Other fees must be spread evenly over a minimum of 5 billing cycles.

Although the rules make strides in protecting consumers from unscrupulous credit card issuers and their expensive practices, they won’t take effect until January 1, 2010. That gives credit card issuers plenty of time to wreak havoc on consumers.