You may have already heard that the Senate passed some sweeping credit card legislation yesterday. A similar bill may also go to vote in the House today, and once the differences between the two versions are reconciled, this Credit Card Bill of Rights could become law as early as next week.
So what does the new legislation mean for you? Here’s a summary of the good news and the bad news for consumers.
The Good News
- Creditors can’t charge penalty fees until you’re 60 days late in making a payment.
- Lower interest rates for cardholders who have paid on time for 6 consecutive months.
- Creditors must give 45 days of notice before upping an interest rate.
- Creditors must send out your monthly bill a full 21 days before the due date.
- Creditors must apply your payment toward the highest interest fees. For example, if you’ve taken out a cash advance, made a balance transfer, and made a new purchase on your card, your payment must be applied towards whichever of those has the highest interest rate.
- No one under the age of 21 will be able to apply for credit without a parent as the primary cardholder, unless they can provide proof of independent income. (This clause could be good or bad news, depending on your viewpoint).
Note that all of the above points refer to the Senate bill; The House bill isn’t quite as far-reaching or stringent on credit card companies. It remains to be seen how much the legislation will change as the two versions are reconciled.
The Bad News
- An interest rate cap is not part of either bill.
- Once passed, the law won’t go into effect for at least 9 months, giving credit card companies plenty of time to run rampant and raise interest rates.
- Many argue that credit card companies will look for loopholes in the new law and find new ways to put the screws to consumers. Examples include charging us interest starting the same day we make the transaction, cutting rewards programs, or charging annual fees.
- Increased government regulation of a private-sector industry usually just mucks things up more than it helps.
What do you think? Are you eager for the new rules, or think the government should just stay out of it?