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Monday, February 15, 2010

In November, I shared information from the Federal Reserve concerning the credit card laws that went into effect on August 20th, 2009. The Iowa State University Financial Counseling Clinic recently shared the following update information on the revisions that have been made to the August 20th phase that will take effect on February 22nd, 2010.

Limited interest rate hikes: Interest rate hikes have become more controlled and will only be allowed under certain circumstances (such as the end of a promotional rate). Due to this change, credit card companies must give at least 45 days' advance notice before changing the rate on your card. Universal default (raising your interest rate based on your payment record with other forms of unrelated credit such as a utility company) will also end. Credit card issuers can only increase your rate for a limited number of reasons and cannot increase rates at all during the first year of a new card. However, you can still be charged fees for over-the-limit and late payments, which are taken into consideration when determining your new interest rate.

More time to make your payment: You will now be given a "reasonable amount of time" to make your monthly payments. This means that your payment will be due at least 21 days after your bill is mailed. Credit card companies will no longer be able to set unreasonable deadlines for payments. Deadlines before 5 p.m. on the payment due date will be illegal. Also, payments that are due on a weekend, holiday, or any day the company is closed for business will not be subject to a late fee.

Limits on over-limit fees: You as the consumer have the right to decide if you want to pay over-limit fees or not. This does not mean you can argue over the charge. What it does mean is that you will be given the option of receiving over-limit fees and allowing yourself to purchase something that exceeds your credit card limit. If you choose not to receive these fees, any transactions exceeding your credit limit will be denied.

Minimum Payments: Credit card companies are now required to let you know the consequences of making only the minimum payment each month. They will have to tell you how long it will take to pay off the entire balance if you only make that minimum payment. They must also tell you how much you will have to pay each month to pay off your credit card in 12, 24 or 36 months, including interest. Remember, the more you charge, the more you have to pay off in the end!

Limited Credit to Young Adults: Under the new law, credit card issuers cannot give credit to anyone under the age of 21, unless that person has a co-signer or they can show proof that they have sufficient income to repay their credit card debt. In this law, it is also stated that credit card companies must stay at least 1,000 feet away from a college campus and are not allowed to offer gifts to entice students to apply for credit. This means, if you are at Iowa State University, you will not see flyers for credit cards at the Memorial Union, or even through Campus Town.

Monthly Statement: You are also going to see a new look to your credit card statement. Your statement will show you how much you have paid in fees and interest this year, along with how long it will take you to pay off your balance (pending you do not make any other charges) when making the minimum payment and when making more than the minimum payment. To see a sample of the new statements, visit the following link: http://www.federalreserve.gov/newsevents...

If all this still confuses you, give our office a call at 712-225-6196. We have specialists and publications which can help you through the maze of credit cards and their charges