New rules for credit card companies have leveled the playing field in recent years. They have tightened up how payments are allocated; fees that can be charged; finance charges; how interest rates can fluctuate; billing; payment processing; and rules concerning minors and students. The new rules also require disclosures from credit card companies to be more detailed. According to the an article from the Huffington Post, one of these disclosures would be credit card statement will show how much a cardholder would have to pay monthly in order to pay their balance off within three years.
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Credit cards necessitate a complex agreement between the cardholder and the issuer. Essentially, the credit card companies have always held almost all the power when it comes to dealing with customers. They make the rules and the cardholder follows them. However the Federal Reserve Board was involved in credit card rules in 2009 and made changes that positively affect the consumer.
How do the new rules affect young people seeking credit cards?
According to the new rules, credit cards cannot be issued to minors who are under the age of 18. The exception to this is for those who have been authorized to use the credit card account of a parent or guardian. The other exception is for minors who have been emancipated from their parents.
College students used to be a huge target for credit card companies. Often consumers keep the first credit card they every get, for a variety of reasons. Therefore credit card issuers have long competed to be the first choice of every college student. However, the new regulations prohibit issuing cards to college students who do not have income that can be verified. The limit on a student credit card cannot be more than 30% of his or her gross annual income for the last calendar
Another rule change applies to students who have a joint credit card with a parent. In such situations, all credit card limit increases must be approved by the parent before the issuer can put it in place. This helps to keep students from getting into financial difficulties.
What do fee changes from the new rules mean for me?
The fee changes that come from the new rules for credit card companies are good news for cardholders. If you happen to opt for a subprime credit card, you will be pleased to know that the issuer cannot charge you fees that exceed 50% of the spending limit of the card in the first year. In fact, upon opening the account, your fees cannot exceed 25% of the limit. If there are other fees, they must be broken up over no less than five billing cycles.
You cannot be charged a fee for the method of payment you choose, unless you are making a telephone payment at the last minute. Another advantage is that your payment due date remains constant on the same date each month, so you can budget more easily.
Over the limit fees are limited to only one per billing cycle. You also cannot incur such fees due to a hold placed on your credit limit by transactions such as rentals.
What other rule changes benefit the consumer?
The credit card changes that were drafted in 2009 caused a huge change in the industry. Many of these credit card rule changes greatly benefit the consumer. Some of them are as follows:
- All promotional rates on new credit cards must be at least in effect for 6 months.
- Increases in the interest rate on a credit card are prohibited for the first year.
- 45-day notice is required for all significant changes to the agreement between the user and the holder, including interest rate increases.
- Double cycle billing finance charges are prohibited.
- When you make payments that exceed the minimum required, the excess is applied to the balances with the highest rate of interest.
- Your bill will be sent 21 days before it is due, so you have more time to pay.
- Bills regularly must provide you with information about the effects of making only payments that are equal to the minimum required.
Such significant changes have made being a credit cardholder much easier. They also simplify the rules, so that many of the complex rules that left cardholders scratching their heads are now no longer in effect, replaced by more common sense changes. The transparency that is now required is a huge benefit to everyone with a credit card.
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