Effect Of Credit Card Bill Largely Dependent On Card Holder Habits

While a lot has been said about how the credit card bill will finally save credit card holders from their big bad wolf, the credit card companies, the effectiveness of the credit card bill will largely depend on how credit card holders are going to adapt to the new changes it will introduce.

Smart credit card holders can take advantage of the many benefits that the credit card bill will bring. Complacent ones are still going to be in danger of having to pay off interests and fees if they are not careful.

To be sure, the credit card bill will introduce a lot of positive changes for credit card holders in the credit industry. Credit card companies will not be able to change a card holder’s rates as easily as they can right now. They will also have to provide a 45 day window of notice if they plan t change interest rates. A card holder who is being charged high interest rates for missing a payment is also eligible for reviews every six months and, if he improves his payment patterns when the review happens, the credit card company has to return him to the former, lower interest rate.

However, these changes will only be effective if credit card holders themselves change their spending habits. Even if the credit card bill is already in place, credit card holders who slip back to the habit of buying too much on credit will still get hit hard. A good example is the legislation enforcing more transparency from credit companies on their practices. Transparency will help credit card holders analyze their credit card details better but there are already ready tools that they can use right now which will help them do that.

Minimum monthly payments is a common and well known scheme by credit companies of enticing their customers with lower monthly payments while earning more from them. The way it works out is that minimum monthly payments does not all go to paying off a card holder’s balance. A higher percentage of the payment will, in fact go directly to the credit company as profits. In the meantime, the credit card holder is stuck paying a considerably larger amount than they actually borrowed.

For instance, a credit card holder who originally borrows $10,000 dollars and plans to pay for it only with minimum monthly payments will actually be paying $14,500 plus for it in interests, based on the average percentage of today’s minimum monthly payments. It will also take thirty years to pay off.

Evidently, credit card holders will get the best out of the credit card bill if they move to a habit of smarter spending and move away from their past reliance on credit.

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