Good news for credit card holders.
New restrictions put into place as safeguards for consumers are now in effect. It should limit the number of fees you receive, and possible keep your interest rate down.
But it certainly will not eliminate credit card fees and you most likely will not see your interest fall as much as you’d like.
The new rules are part of the Wall Street reform bill, which was signed earlier this year. It was the most comprehensive overhaul of the credit card industry in U.S. history, and it came on top of other changes from the Credit Card Accountability Responsibility and Disclosure act of 2009.
But will it be enough to keep people like you from falling into the trap of credit card debt?
While the new restrictions may help keep you from getting charged extra on your bill, it won’t help you create a budget and spend wisely like personal checks can.
You still have to be responsible for your own finances. When you order checks online you’re taking a step in the right direction.
It’s not that personal checks and credit cards are in direct competition with each other. There is certainly room for using both checks and plastic payment in every day life.
How
ever, it’s important to find the right balance, and checks can be one way to make sure you’re sticking to a plan. Keep in mind that when you use personal checks you’re using your own money. When you swipe that credit card – you’re spending money you don’t have.
At Check Advantage, we’re happy to see positive changes for consumers with credit cards, but we also want you to be aware that things still are far from perfect.
Here are the details of the new credit card rules and the loopholes that make them a little less exciting.
Late Payments
Credit Card companies can now charge no more than $25 for most late payments. Fees had been between $35 and $39 no matter how much you owed or what the minimum payment was.
The Catch: That $25 fee can go up if you show what’s described as a “pattern of repeated violations.” For example, if you have two late payments within a six month period – you can be charged a higher fee. Card issuers can also raise the fee if they can prove that it reasonably offsets its own cost of dealing with the violation. Who knows what they could use to determine that!
Other Penalty Fees
The penalties for other credit card sins are also changing. If you go over your credit limit, your card issuer can only charge you a fee that is no larger than the amount of the violation. In other words, if you go over your credit limit by $10, you can only be fined for that amount or less.
Also – you can no longer be charged for not using your credit card. That means no more inactivity fees.
The Catch: These rules only apply to penalty fees. Credit card companies can still charge you fees for other services, and will most likely create new fees to offset the loss of revenue from these new protections. Many issuers already increased fees for things like cash advances, balance transfers and using your card overseas.
Even though the inactivity fees are gone, banks can still choose to close inactive accounts, and that could hurt your credit score.
Remember – there are no fees for using personal checks and they will almost never affect your credit rating negatively.
Interest Rates
Any interest rate hike on your credit card needs to be reviewed every six months. That’s to determine whether the rate increase is still valid. If it is determined that factors have changed, your interest rate could be decreased. This actually applies to all rate increases going back to January 1st of 2009.
The Catch: Just because a review by card issuers shows that your interest rate should be lowered, it doesn’t mean it will go back to your original interest rate. Your card could have seen a 10% hike, but you’ll only get a 2% reduction.
Banks also determine the need for a rate reduction using factors like market conditions, or whether you current rate is in line with what is being offered to new customers. Many consumer advocates don’t think credit card holders will see too much relief from the interest rate issue.
Another possible negative result of the changes is the availability of credit. Some financial experts expect those who issue credit to be a bit stingier about extending credit. So – in some cases – it might be harder to get a credit card in the first place.
That’s another good reason to keep personal checks around as a payment option. If the only thing in your purse or wallet is plastic – you’re going to lose track of your personal finances. Keep a book of checks handy along with your trusty check register.
Watch the ABC News video below to learn more about the changes with credit cards and how they could affect you.
Image credit: DHester Pixel Perfect Digital
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Interesting info.! Thanks.