The Credit Card act will be fully implemented as of
this December, however, we are already seeing many provisions, and the more you are aware, the more you can benefit. Below are some of the major changes, and how you can use them to your advantage, or avoid the creditor using it to their advantage.
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1.) The Credit Card Act only applies to personal credit cards. Any business credit cards are treated the same as they were before. Should you have a business card, and participate in certain acts such as co-mingling your personal and business funds, your personal credit cards could lose the advantages of the Credit Card Act.
What you need to know:
You should always maintain separate accounts for personal and business accounts. That way you can receive the advantages of the Credit Card Act, and you may protect your personal assets from any liabilities the business incurs.
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2.) Rates on balances already incurred cannot be increased. However, if a promotional period expired, or if you are 60 days late, this rate can increase. Therefore, if you have a card with an interest rate that was only to be set for 6 months, be aware that when that 6 months is up, the interest you owe will
instantly increase. If your income is not going to increase within that time frame, there is no real advantage in utilizing this promotional period, as it may only hurt your credit score, and it will not save you any money. Also, if you have to pay your credit card late, try not to exceed 60 days or you could owe even more money in interest on top of late fees.
What you need to know:
The creditors now need to give you 45 days notice in order to increase your interest rate outside of these two exceptions. The notice has to be in writing (if you receive electronic statements, pay attention to your email), and you can object to it. If you object, the creditor can freeze your account. You will still have to pay what you currently owe, but you are not subject to the increase in interest.
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3.) Creditors can no longer charge over the limit fees without permission from you.
What you need to know:
If you do not allow your creditor to charge an over the limit fee, your card will most likely get declined when you try to use it in excess of your limit. You should make sure your creditor follows the option you choose for each card. For example, you may want to make sure if your child uses a credit card, or if a credit card is solely for recreational purposes, that it doesn’t allow over the limit charges and fees. However, on an emergency credit card, you may prefer an over the limit fee and not have your card declined when you truly need it. Either way, use this option
to your advantage. In the long run, it may be more advantageous to have the clerk at the mall look at you funny, than to have additional debt you cannot pay.
Every situation is different, and you know what works for you. Should you choose to have the fee incurred when you exceed your limit, the creditor can only charge one fee per month.
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4.) Statements must now be issued 3 weeks before payment is due, compared to the prior 2 weeks.
What you need to know:
A lot can happen in a week, and your Visa payment is not always the first thing on your mind. Make a note, put it on your calendar, set a phone alarm. This extra week can allow you that little extra time you need to make a payment, so make sure that extra week doesn’t cause loss of memory. Don’t let the statement get lost in the kitchen junk drawer, or somewhere in your inbox.
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5.) Creditors can no longer double bill you. Prior to the Credit Card Act, creditors could charge interest on the balance you owe, as well as the balance you paid the previous month.
What you need to know:
This is a good thing that should have
always been the law, and it should save you money in interest.
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6.) Payments now have to apply to higher interest debt first.
What you need to know:
This only applies above and beyond the minimum payment. Therefore, you should always try to pay over the minimum payment, even if you can only afford $5 over.
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7.) Your payment due dates must remain consistent every month.
What you need to know:
Know what day of the month your bills are due, and mark them on your calendar every month. That way, whether your bill gets lost in the mail, or at home, you have a reminder. Every month, your bill will become due around the same time.
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8.) Service Fees now have a maximum cap, however, interest rates do not.
What you need to know:
Because service fees are capped, and other provisions of this act will essentially decrease the amount of income the credit card companies can make, you should be aware of other potential fees. Annual fees may become more common, or may increase. There may be higher balance transfer frees or inactivity fees. To truly take advantage of this act, you can’t let the credit card companies charge you somewhere else. Read your mail/email. Any changes to your account now require 45 days notice. If you object, they will freeze your account and allow you time to pay your balance.
You will then not be subject to the changes, but your card will no longer be active. You may also avoid certain charges. For example, if your credit card company intends to start charging inactivity fees, put a tank of gas on the card once a month. This will avoid the fee, and potentially increase your credit score, as inactive cards don’t offer much opportunity to increase your credit score.
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9.) Creditors must now show you, how long it will take
to pay your card in full at the minimum payments, and how much you need to pay to pay your card off within three years.This should be showing up on your monthly statements by now.
What you need to know:
If you receive email notifications, you actually have to click ‘statements’ to see this. It is in chart form, and may be very surprising. Depending on your balance, paying a few extra dollars a month can make the difference of having this same debt for 3 years or 20 years.
It can also be the difference in saving over thousands of dollars. Whenever possible, you should pay more than the minimum, even if it is just $5 over the minimum. The effect this can have is great.
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For additional information on this Credit Card Act or, increasing your credit score, check out our website at www.BrownVanHorn.com or give us a call and set up a consultation with one our attorneys. We offer you great advice on how to manage debt and increase your credit score, as well as explain services such as credit restoration and debt negotiation. Bankruptcy can also be a great tool for increasing your credit score. While the actual filing can cause a decrease to your credit score, the impact in the long run can be more positive than negative as you are viewed more favorable by creditors when your debt is minimal to none.
