The federal credit-card law could take away billions of dollars in fees and interest charges paid by consumers on a yearly basis. But card issuers have already imbibed new strategy to mint money. The federal credit card law has brought up reforms that are listed below, that show how the credit card holders might get affected.
The reform prohibits the universal default:
The credit card holders have been complaining about the credit card companies, raising interest rates, since long, that on being late card or missing a payment on a separate account, even if they had remained current on the first card will attract higher rates of interest. This practice was known as universal default, and according to the card companies the missing payments on other accounts has inclined the risk of lending to a customer, which leads to higher interest rates.
But according to the new reform, the new law not only restricts the universal default, it also stops the card companies from raising interest rates on outstanding balances, as long as the bill is paid on time.
Word of caution: the card issuing institutions can still change the rate on charges that could be termed as new and as long as they give you proper notice.
The reform puts time limit on some interest rates:
The law has affirmed that the promotional interest rates should last at least six months. For new credit card accounts, the issuers cannot hike the interest rates in the first year itself. Further the Card companies are made to review consumers account regularly and lower the rate if required.
Restrict some fees:
After this reform the credit card companies won’t be able to charge a fee if the consumer crosses the credit limit. Indeed such transactions shall be declined if insufficient amount is found in the account. Further the card companies cannot charge a fee for any method of payment, including mail, phone or electronic transfer.
Settled ground rules for processing payments:
If a customer holds a credit card with multiple balances at different interest rates and pays more than the minimum each month. That extra money will go toward the balance with the higher interest, in order to bring down the debt faster.
Billing statements will have more information:
The new statement of customers shall disclose the penalty for any late payments and intimates that they could result in higher interest rates. It will also entail a warning about the dangers of making the minimum payment required.
Restriction of access to credit for people younger than 21:
Now the consumers below the age of 21, will no longer be able to open a credit card account without a cosigner or proof that they have independent income.