Credit card debt payment could be speeded up by the new rules

With the new rules coming into force from January 1^st, 2011, credit card issuers have to treat the card holders with greater fairness. This includes giving card holders more control over the credit limit on their cards as well as on the interest rates that they are charged. The card issuers are also now expected to help out credit card holders as much as possible in repaying the outstanding debt that has been built up on the cards.

These changes in rules are applicable for all the credit card issuers. One of the new rules is to end what is known as the negative payment hierarchy that a lot of creditors have charged on the customers. Different card issuers charged varying interest rates on different types of debt on the same card. That means that the interest rate charged could be high on cash withdrawals and over the counter transactions while it could be low on balance transfers from other credit cards. The negative order payment was a strategy where card issuers used to allocate the consumers’ payment money to the cheapest debt leaving the more expensive debt to incur greater interest. This practice will now officially end thanks to the new rules and repayments made by customers will be used to knock off the most expensive debt first and so on. This could be a great step in the direction of protecting credit card customers from cheap tricks played by card issuers. The negative order of payments which has raged up some debate for quite a while is finally going off benefiting a lot of credit card customers.

Another rule change would lead to an increase in the minimum payment per month of the credit cards. The card issuers usually set these monthly payments to a low amount leading to the repayments from customers not covering for the interest sufficiently resulting in greater debt. The new rule states that if there is an outstanding debt on a card, the minimum payment would be equivalent to the sum of the interest charged by the card issuer on the card and 1% of whatever, the customer owes, which means part of the debt would be indeed knocked over by the minimum monthly payment. Also credit card issuers would have to tell the customers at least a month in advance about any increase in the credit limits available to them.