Your Money Matters!

The good and bad news about the upcoming credit card legislation!

I would like to prepare you for the next wave of changes with the new credit card law that will become effective in 2010. Good news, if you apply for a brand new credit card, the rate must remain the same for one year. More good news is your current credit card company will not be able to increase your rate without giving you a 45 day notice. Currently they only have to give you a 15 day notice of a rate increase. The bad news is many of the companies are increasing their rates now. Therefore, I encourage you to look at your last credit card statement and verify they have not done so. Furthermore, maintain a close watch on all future correspondence from your credit card company for the same reason. Keep in mind many credit cards are variable rate programs rather than fixed rate and the rates may go up when the index that the rate is tied to goes up.

The good news is if your credit card company does increase your interest rate, they cannot apply that higher rate to your existing balance. Also, as you make your payments, they must apply those payments to the higher interest rate balance first. In addition to increasing rates, many of the credit card companies are also slashing limits and they don't have to give you notice unless the decrease causes you to pay a penalty such as an over-limit fee. And with respect to over-limit fees, you have to agree to pay them. Otherwise, they cannot charge you for going over your limit. However, you will not be allowed to go over your limit unless you agree.

The good news for consumers is the new law is trying to do away with unfair or deceptive practices. Starting in August, you should have begun receiving your statement approximately 21 days before your payment is due. Companies will no longer be able to make your payment due on a weekend or the middle of the day, and if the due date is on the weekend they must give you a grace period. Credit card companies can no longer use the double-cycle billing which means they cannot base the finance charge on two months of balances. What this does to individuals that pay off the balance of their statement one month but not the next, is to pay a higher finance charge. I'm sure you will agree that these actions appear unfair and misleading.

Another good change is that your rate cannot be increased because you are delinquent with another financial institution or they have arbitrarily determined you have become a higher risk. However, if you find you are unable to pay the required minimum payment and you become 60 days delinquent, the credit card companies can raise your interest rate. Once you bring your payment to a current status and continue to do so for six months, your rate must be reduced back to the original rate prior to your delinquency.

If you wonder how you are going to keep track of all of this, your statement must include how long it will take to pay your credit card off if you make your minimum payment. Also on the statement it will be required to let you know what the payment would be if you wanted to pay the balance off within a three-year period.

Credit card companies will no longer be able to grant credit limits to individuals under the age of 21 unless the applicant can prove the ability to repay the debt. I believe this is a response to the massive advertising campaigns directed toward college students.

Keep in mind that credit card companies will be losing millions of dollars based on these new laws. I guess that could be put into the bad news column for those credit card companies that have been operating under these deceptive practices!

I invite everyone to look at CFCU's credit card program. We offer a no-frill VISA program with a reasonable fixed rate and no annual card fee. The good news is every time you use your credit card from Chiropractic Federal Credit Union, it also advertises that you are a Chiropractor and gives you an opportunity to promote your profession. I know! When I use my credit or debit card in my local community, I have been asked "What is Chiropractic Federal Credit Union?" several times throughout the year for the last 19 years!

Courtesy of Anne Blain, CEO of Chiropractic Federal Credit Union
If you have a financial question, please forward to:
ablain@chirofcu.org
Subject: Your Money Matters