Has the New Credit Card Law Benefited You?

Has credit cards become safer with new legislation in place? Do you know what are the safeguards that have been implemented to prevent predatory policies of the credit card companies?

1. Retroactive rate increased

Credit card issuers should not increase rates until the promotional rate expires. According to the universal default clauses, you are not accountable to any penalty charges for late payment on unrelated account.

If you are late by 60days in the repayment plan, then you may be exposed to the costly default rate. But if you provide evidence of 6 months of consecutive timely payment, the bank can lower your rates.

2. Advance notice on rate hikes

According to Lending Act, only 15 days notice is given to the card holder before the implementation of any plan. If there is any change in the terms of the contract which includes the hike in the rate that needs to be notified before 45days. However, the bank does not need to give advance notice for adjustment of credit card limit.

3. Restriction on charges

An over-limit fee would be charged on the approval by your creditor. Banks cannot levy any charges to settle credit card debt but they can contact you for repayment through telephone or internet. A penalty can be charged on your outstanding balance just to quicken the repayment process.

If the bank fails to accept the payment by mail, then they might not levy additional charges for it. If the payment is made in the local branch office then it would be advisable to pay off the amount before the due date. Any delay in the payment in this process is charged with a late fee.

4. Restrain Youngsters From Credit Cards

For those below 21 years old, you need to show that you are financially stable before applying for a credit card. Else, a co signer above the age of 21 years is required.

Since most youngsters are not savvy enough to use credit cards responsibly, the law will prevent them from getting into debt too early.

5. End of double cycle billing

The new law banned the double cycle billing. In the past, the credit card issuer can charge interest rate on the amount that had been paid off the previous month which is very unfair.

Overall, I think the changes will definitely benefit consumers. But even with some evil practices curbed, you can rest assured that high risk bankers/credit card companies will still be able to fleece, erm, make money from consumers through other means.

Don't Fall Prey To Predatory Lending

There are lots of people who prey on the poor - they bear gifts in your darkest moments but are actually piling on your woes.


I saw this graphic on Mint.com (click to enlarge) which gave good examples of predatory lending. These companies make their profits by charging fees that seem reasonable but turn out to be insane.

Do you know payday loans can hit you with as much as 360% interest per year? No wonder it has been deemed as loan sharking in 13 states.

Rent-To-Own arrangements which can range from furniture, gadgets, housing, etc. may sound sensible (why not pay a bit more to take up equity) but the reality is that you end up paying about two times more than the item costs.

That is when you factor in the insurance, weekly payments, sales tax, etc. and if you can't afford to pay the loan, they are helpful enough to offer you payday loans with a 531% APR.

Last but not least, credit cards which claim to help people "re-establish" their credit. I too am flabbergasted by how credit card companies give you a $250 starting limit and almost whittled it down to zero with their hidden charges (program fee, annual fee, set-up fee, monthly service fee, over the limit fee, etc.)

Evey one of such schemes only serve to push you further into debts. The truth is there is no short cut to becoming debt-free. Clearing debts is a step-by-step process which require you to be disciplined, make sacrifices and live modestly.

If any company tell you that you can maintain the same lifestyle while getting your finances in order, that is bullsh*t and probably a scam.

Suze Orman's Advice: Pay With Cash

Suze Orman, a highly respected money guru, has recently called on Americans to start paying for purchases with cash.

She was heard saying on CNBC, "Let’s go back to the times when you literally paid cash for everything. That’s right. Cash. Stop using your credit cards altogether."



I am definitely in favor of Suze Orman's "Back to Cash" movement. It is high time we, as a nation, wean themselves off debt and live within our means.

In any case, credit card companies aren't looking out for its customers. They are adopting more aggressive tactics to boost their profits, with stricter credit-card legislation looming.

When it comes to raising interest rates, our credit scores and history of timely payments count for little. If you have low balances or periods of inactivity, your account could also be closed.

Since credit card companies are treating us like dirt, we might as well say goodbye to credit cards once and for all. Heck, just pay with cash. No more identity theft or hidden/unexpected fees to worry about.

The initial adjustment may be painful but once you start planning a household budget, your expenses will be easier to control.

No Mercy From Predatory Credit Card Companies

The ink has barely dried on the credit card bill which President Obama signed in May and credit card companies are running amok with their predatory actions again.

It seems like they are going all out to squeeze water out of a rock, lest their profits are diminished from the changes which go into effect in the middle of 2010. And they have yet to devise ways or loopholes to circumvent the new rules or shift the goalposts. Thus, the anxiety of credit card companies is understandable.

Suze Orman pointed out correctly that credit card companies have an entire year to have their way with you. And nobody will hear you scream.

Ya right, we can't really expect Obama to amend the bill again especially when he already has so much on his platter, from taxes, financial reforms, war, health care, economy, etc.

The USA Today reports that "Most issuers have raised rates or fees for certain borrowers. In the latest round, Bank of America and Chase have increased, or are increasing, their maximum balance-transfer fees, from 3% to 4% and 5%, respectively."

"Chase is also expanding the definition of who could get hit with a penalty interest rate. Meanwhile, InfiBank is establishing a higher minimum APR -- the greater of 15.99% or 11.99% plus the prime rate -- on many cards. And Capital One and Citigroup continue to raise card rates for certain borrowers."

If you continue to roll over your credit card debts, it is time to exercise discipline and get your finances in order by whittling down the debts. The credit card companies are not known for being charitable and will pile on your misery at the moment when you need them most.

But in fairness, the blame cannot be placed soley at the doorstep of credit card companies. They're just doing their job, which happens to be screwing us for maximum profit so that they can take home fat bonuses.

We have to take some responsiblity for falling prey to their temptations. Our elected officials are also to blame. Instead of working towards the good of American voters, they are protecting these for-profit organizations every step of the way.

What do you guys think?