The first of two credit card reforms went into effect earlier this week. The other reform will not be effective until July 2010. Together, the new laws should provide considerable help to you and other consumers by eliminating some of the worst practices of the credit card companies.
The new laws will make the following changes:
First, the credit card company cannot raise your interest rate if you are current on your payments. The credit card company can only raise your interest rate if you are more than 60 days delinquent.
Second, the credit card company must give you 45 days notice before it changes any terms of your agreement.
Third, when you pay more than your minimum balance due, the excess must be applied to the portion of your balance with the highest interest rate. For example, if your total balance is $1000.00 and $600.00 is your regular balance charges at 12% interest, and $400.00 is for cash advances at 25% interest, then the excess will be applied to the $400.00 balance that is accruing a higher interest amount.
Fourth, if your interest rate was raised due to delinquency of your account, you can have your interest rate lowered if you make on-time payments for six consecutive months.
Fifth, credit card companies can no longer raise the interest rate on your account with them due to your delinquency on another account with a different company.
Jonathan Ginsberg, my colleague in Atlanta. predicts that the credit card companies will react to these new laws by instituting more aggressive collection activities, which will drive up the number of people seeking bankruptcy relief.
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