While it’s not official yet, the aptly named “Credit Card Holders’ Bill of Rights” is one step closer to becoming law. The bill was recently passed by the House of Representatives, leaving the Senate to take up the issue next – if passed, the new laws would go into effect in July 2010. As consumers struggle in the current economic downturn, the recent interest rate hikes on credit cards across the board have been met with disapproval on many levels. However, credit card companies and their lobbyists continue to push against this new reform. So what will the Card Holders’ Bill of Rights mean to you if it passes? Among the proposed changes that consumers can feel hopeful about are:
- An end to Universal Default – credit card companies will no longer be able to charge you the default rate on your credit card just because you’ve missed a payment to another card issuer.
- Prevention of double billing cycles – credit card companies will be prevented from using your past billing cycle to increase your interest charges.
- No more retroactive rate increases – rate increases will no longer be applied to past balances, or past billing cycles.
- Mandatory 45 days notice of rate increases – if your credit card company wants to raise rates, it will have to notify you 45 days in advance. This gives the average consumer more time to shop around for a better rate.
- Limited Fees on Subprime Credit Cards – no longer will credit card issuers be able to charge fees upwards of 90% on subprime cards. The new legislation will put a cap on the fees at 50% of the card balance, with only half those fees allowed to be payable at the account opening.
Needless to say, credit card companies are lobbying hard to avoid these new regulations. They claim that credit will be more difficult to obtain for the average consumer if they are not allowed to continue their current billing practices. Whether or not the bill is ultimately approved, credit card rates are unlikely to lower any time in the near future, as the companies attempt to offset losses expected as credit card defaults continue to climb due to the rise in unemployment across the country. Regardless as to whether or not the bill passes, there are some steps that the average consumer can take to minimize the impact of the current credit crunch:
1. Keep your balances low – lower balances means lower payments in terms of interest.
2. Pay all credit card bills early – make certain that you get the payment in well in advance of the due date, as many credit card companies begin charging late fees if the payment is even one minute late.
3. Read the fine print – many credit card companies have started raising the interest rates on all customers, even those who pay on time regularly. Make sure that your current card agreement is one that you can live with.
If the Credit Card Holders’ Bill of Rights does pass, it will be a huge step forward for individuals who want to build and maintain their good credit. The more transparent credit card companies have to be in their billing practices, the easier it is for consumers to make an informed choice about who to turn to for their credit card needs.