The Credit Cardholder’s Bill of Rights

A welcome end to retroactive interest rate hikes

When the Credit Cardholder’s Bill of Rights go into effect next February, consumers will be protected from a host of money-draining practices.

One that will save consumers the most and cost the credit card issuers an estimated $10 billion is the prohibition on retroactive rate increases.

Banks will no longer be able to raise the rates on your existing balances unless your payment is late by 60 days or more. That means if you’re late on Card A, Card B won’t be able to raise your rates. This of course doesn’t apply to introductory rates, which you accepted with the clear understanding that the rate would raise on a set date.

But even those introductory rates will have restrictions. In order to offer them, credit card issuers must keep them in force for a minimum of 6 months. No more introductory rates that expire and bump to the highest rate within 30 days!

Even better news – if a cardholder becomes 60 days late and his interest rate is increased as a result, he can regain the lower rate by making 6 consecutive on-time payments. This particular provision doesn’t take effect until August 2010, however.

Cardholders will also get 45 days advance notice of rate hikes and/or any other key contract changes. Under the current truth in lending law, credit card issuers must only give cardholders a 15 day heads-up. While I haven’t seen this in writing, the notice they give must have plenty of leeway, because I know dozens of people whose interest rates and credit limits were changed without them being aware until they received their bills.

Perhaps this is one reason why the new laws will call for the terms of the agreement to be written in a large type size. Hardly anyone actually reads those lengthy notices written in a 4 or 6 point type.

The bad news is that this provision doesn’t apply to changes in credit limits, so you will still need to go on line and check your spending limits before embarking on a quest for a house full of new furniture. You could get to the store and find that you don’t have the credit limit you expected.

The good news in that bad news is that credit card issuers will no longer be allowed to slash the limit to a level that would trigger a penalty such as an over limit fee. That’s a practice that has become common in recent months and could become even more common in the months leading up to implementation of the new laws.

Remember that credit card issuers will be using the next months to ramp up their profits, so be very careful to read everything that comes in the mail from any of your card issuers.

Author: Mike Clover

One Response to “The Credit Cardholder’s Bill of Rights”

  1. Credit Cardholders says:

    It's good that credit card issuers will no longer be allowed to slash the limit to a level that would trigger a penalty such as an over limit fee

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