New credit card laws passed by Congress in 2009 are going into effect. What you need to know about credit card laws and how they have changed won’t be a big difference from what things were before. Credit Card companies testified in front of Congress that they would stop using their very worst tricks. That, plus a multi-million dollar lobbying campaign made sure that the new credit card laws did not require sweeping changes to the credit companies typically sneaky and underhanded business practices.
One of the major rule changes states that when the credit card issuer decides to unilaterally change the terms of your contract, they have to give you 45-days advance notice. If the new terms are not acceptable to you, you can opt out.
There is a catch. In order to opt out, you must cancel your card, and close your account. Then, you have to pay off the whole remaining balance within a certain number of days. Oh, yeah, and that doesn’t apply to variable rate cards.
If you pay off your credit cards every month, then this is no big deal, because you could always pay off your card account and cancel it before you were charged any interest anyway.
If you carry a big balance on your credit card, then this doesn’t really help you anyway, unless you can figure out how to pay off that credit card account in 90 days. If you could do that, you probably wouldn’t have the large balance in the first place.
Basically, the only people this really helps are people who have small to medium sized balances on their credit cards, and people who can take advantage of balance transfers to other credit accounts. Of course, in that case, it was always possible to do that and then cancel the card anyway.
In other words, you have to be just as sharp and aware of credit card companies tricks.
Credit Card Rules Change Used to Hide Bad Company Behavior
As we’ve come to expect from banks and credit card companies, many credit card issuers are taking advantage of all the noise around the new credit card rules to make a few not-so-favorable changes to their credit card terms as well.
American Express recently notified some customers that their rates were going up. The new rates are a variable rate equal to PRIME plus a certain percentage. Some card holders report getting new terms of PRIME RATE plus 12% or so. With the Fed holding rates at all time lows (nearly zero percent) that means that the interest rate on these American Express cards will be around 15%.
That doesn’t sound too bad. Except for two things, first, now that these customers have variable rate cards instead of fixed rate cards, the helpful rules no longer apply because different rules apply to variable rate accounts than credit card accounts with fixed rates.
Second, watch out as the economy recovers and the Fed starts to raise interest rates back to more normal levels. PRIME interest rates of 4% are just a 1% raise in the Federal Reserve target interest rate away. Putting the Fed Funds rate back at a still very low 3% means a PRIME rate around 6% and the American Express card interest rate rises to 18% pretty quickly.
Be careful out there. Remember always take advantage of reward credit card programs. Use these various credit card rewards points to offset the expenses and inconveniences of always having to watch your back to make sure the credit card companies are sticking a knife in it.