Bad For Banks, Good For You
On February 22, 2010 a new set of credit card laws took effect which is good for consumers but bad for credit card companies. The new laws, passed last year under the Obama administration, places restriction on how and when credit card companies can raise annual percentage rates. Banks are up in arms about the recent changes. “Late last year, JPMorgan Chase, the nation’s largest credit card issuer, warned it expected its credit card business to lose as much as $750 million this year as a result of the new legislation.” reports CNN. Citigroup, which serves customers in both the US and Mexico, warned that their business could lose $400 million to $600 million dollars as a result of the new credit card laws in 2010. Many banks have introduced new credit card fees to combat potential lost profits.
Improved Billing
While credit card issuers and banks are not so fond of the new credit card laws, consumers welcome the new laws with open arms. One of the mandates of the new laws is that credit card companies must notify cardholders of their amount due 21 days in advance. Also, companies must bill their credit card clients on the same day of each month. This move will help consumers better manage their bills and pay them on time. Many credit card issuers, such as Capital One, have improved their statements to be easier to read and understand.
Tougher To Raise Credit Card Interest Rates
Another huge benefit for those with credit cards is that the new credit card laws enacted in 2010 make it more difficult for banks to raise existing interest rates. “Nearly all interest-rate increases on outstanding balances will be prohibited,” says Christian Science Monitor. Banks are also barred from increasing credit card interest rates in the first year of service and must notify customers at least 45 days in advance before increasing their rates.
Changes For Young Adults
In addition to the other credit card laws, people of 18-21 years of age must prove their ability to pay credit card bills or have a cosigner in order to be issued a credit card. This law helps protect those who may not fully understand or are new to credit and credit cards. Card issuers are also no longer allow to offer free merchandise on college campuses in exchange for signing up for a line of credit.
Opt-In Overdrafts
Credit card companies must now deny charges that exceed the cardholder’s agreed credit limit unless they have specifically opted in to overdraft services. Where a cardholder’s transaction would have previously been approved and assed a fee, the charge will now be declined. This is a welcome change for the many Americans whose credit cards are constantly near their limit.
Caveats
The one downside for consumers is that the new credit card laws in 2010 may cause less credit to be available to them. Now is a very important time to monitor your credit score and improve your credit to ensure that funds are always available when you need them. Be wary of potential fees imposed by credit card companies to offset losses due to the new credit card laws 2010. Card issuers are still allowed under the new laws to lower your credit line without reason and rest-assured they will try to find loopholes to increase their profits. However, the new credit card laws are meant to help consumers in the long run and they will do just that.
