When the credit card bill was passed last May 22, credit cardholders in the United States were elated, expecting a slew of changes in credit card industry practices which will benefit them.
While it is true that the credit card bill will put a stop to some of the more predatory practices of the credit card industry, the changes that the credit card bill will bring will actually have both a positive and a negative effect on credit cardholders. What follows is a list of the pros and cons that the credit card bill legislation will bring once it becomes active on the first quarter of 2010.
Pros
1. Credit card companies will have to mail monthly statements a minimum of 21 days before the statement's due date.
In a situation where there are multiple debts to be paid off, payments to the credit card will go to the debt having the highest interest rate. Currently, the reverse is true.
2. Credit card introductory rates are to remain active for a minimum of one year. If the credit card company wants to raise rates after that, it is required to give the cardholder notice 45 days before the interest rate is to be increased. Currently, the minimum is only 15 days notice.
3. Double billing cycles will no longer be allowed. Currently, double billing cycles are the bane for credit cardholders who transition from full monthly payments to carrying a balance. Double billing eliminates the period of no interest in between the transition.
4. Credit card companies have to make full disclosure of their practices. One very useful result of this legislation is requiring credit companies to inform their customers how much will be the total cost and how long paying off the debt will take if the customer only pays the minimum amount due every month.
Cons
1. The interim period before the credit card bill takes effect will see many credit card companies raising interest rates and fees; essentially doing everything they can to increase profits. Consumers can also expect higher introductory interest rates as banks won't be able to raise them for at least a year.
2. A cut back on available credit is expected as credit companies try to cover their profit losses caused by the new legislation.
3. Annual fees and other kinds of charges are going to be making a comeback to generate more income for credit card companies. Even cardholders with great credit card ratings won't be spared.
4. People with low credit card ratings will have a harder time securing credit, especially through unsecured credit cards. An option is a secured card. This type of card will require a deposit.