New Credit Card Act 2010
Many people would agree that credit card companies are in it for the profit. Obviously, as a legal business, they provide a service to a consumer who pays for it, but in the case of credit, you pay for it in interest. While this is a standard practice and there is absolutely nothing morally, socially, or legally wrong with it, some companies have taken advantage of their position and forced unfair policies, changes, and most of all fees unto their customers. Even though many people are responsible credit holders and they understand the contracts they sign, some creditors find loopholes that can allow them to make drastic changes to your contract.
Typically, these changes are caused by something that you did, or in some cases did not do. For instance, many banks will change your rate if you miss a single payment. Some banks have been known to tack on very specific fees to your account for reasons that you might not understand at first, and furthermore were not necessarily discussed at length when you opened your bank account.
The Rate Changes
New credit card act 2010, though aims to put an end to as many of these unfair practices as possible. For instance, there is now a blanketed grace period of 45 days that your creditor must give you before they make any significant changes to your account. This applies first of all to rate hikes. Originally, companies could change the rate on you without warning. Now, you must be given plenty of notice before they can alter your rate, and they must tell you what the rate will be. However, they can still change it just for missing one payment, but there are a few stipulations and rules.
Secondly, this grace period applies to fees changed under the universal default guidelines. Credit card companies use universal default to determine how likely you are to default on all of your accounts, not just the ones you hold with them. This means that they will monitor your payment behavior with other companies that report to the credit bureaus, like loans, mortgages, and utilities. If you miss payments with them, your credit card company can see assume that you will also miss a payment on your bill and can increase your rate. While the new regulations do not abolish this practice, it does provide you the same 45 day notice.
Fees are another thing that will always get you in the end. However, new credit card act 2010 reduces and, in most cases, completely removes over-the-limit and NSF fees. Now, in order for a credit card company to be able to charge you fees, you have to agree to it when you sign up. Basically this means that you cannot use your card past the limit, and you will not be charged for going over the limit after your finance charges are added up. However, if you do allow them to charge you over-the-limit fees and NSF charges it will be something more reasonable, like a percentage of your monthly installment.
Another policy change applies to subprime lending. A few years ago, this term was heavily applied to the housing market crash, but it occurs widely in basic credit issuance too. If you are approved for subprime credit with an opening fee, the new laws prevent credit card companies from charging you more than 25% of your available limit within the first year. This keeps them from taking advantage of people who are in limited situations and are trying to improve their credit standing .
Finally, credit card companies are now required to pay down your highest-interest balances as first. Previously, if your card had multiple uses, like cash advance and balance transfer, your lending institution would use your monthly payments pay off whichever balance had a lower interest first, leaving you susceptible to higher interest for as long as possible. Now, they must pay down your high-interest balance first.
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