Kirk M West's Blog

As many of you know, the new credit card rules took effect nationwide last week. While definitely a "win" for consumers, they present "new" challenges as well that we will face from the credit card companies and banks. Let's start with how the new law will affect us:

1. The end of confusing billing practices Credit-card payments will be due at the same time each month, with notification of the bill made at least 21 days in advance of its due date. Payments will be applied to highest interest-rate balances first so that customers can pay off their balances faster and more cheaply. Finally, credit-card companies will be obligated to use plain language in plain sight” on all materials related to the account and periodically display on statements how long it would take consumers to pay off their existing balance and interest charges if they paid only the minimum due.

2. Interest-rate reform Nearly all interest-rate increases on outstanding balances will be prohibited and card companies must notify the consumer 45 days in advance of an interest-rate increase. Additionally, there cannot be wny interest rate increases for the first year any account is open.

3. Opting-in for overdraft and overlimit protections Customers will now have to opt-in to an overdraft program instead of being automatically enrolled. This means that if cardholders try to make a purchase that exceeds their limit or overdraws a debit account, their card will simply be declined. Under the old rules, the transaction could go through and the consumer would be fined.

4. Protections for young consumers Credit-card companies face greater restrictions on marketing cards to college students. More generally, those under 21 will have to prove that they have the means to pay off their card limits or have a cosigner before they can be granted a card.

The way in which the banks say that they will "compensate" for the billions of dollars of lost revenue that they say that they will face is through higher initial interest rates as well as higher fees.

Here's my BIG RECESSION BUSTING TIP of the day (Ok, Ok, it really came from Suzie Orman;):

Go to www.creditcardconnection.org and use the tool that allows you to enter your zipcode to find the local bank with the LOWEST interest rate on their credit cards. It's like magic!!  The federally chartered banks and lending institutions (such as credit unions) are capped by law an 18% finance charge, so why not save money AND support your local businesses? Brilliant!

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