Credit Card Reform is now in effect. It is formally known as the Credit Card Accountability, Responsibility and Disclosure Act. I read Sandra Block’s (USA Today) article, “How credit card reform will affect you”. This article does a great job explaining how these changes impact credit cardholders today.
Some of the credit card reform changes worth noting are:
- Consumer protection restrictions placed on those under the age of 21. These consumers will require a cosigner or proof that they can pay for the credit extended. College students can say goodbye to those free gifts for filling out credit card applications too.
- Interest rate change restrictions:
- Limits any rate increases on existing balances — unless it is a promotional rate, variable rate or the cardholder is more than 60 days late paying the bill.
- Requires 45 days advance notice for a rate increase
- Credit card companies are prohibited from raising the interest rate on new accounts for 12 months
- Improved account disclosure. Credit card statements will provide more details about the true cost of debt.
With the average credit card debt over $10,000 per household, the interest rate changes could result in tremendous savings. It will be interesting to see if consumer behavior is different — once credit card companies start revealing the amount of time it takes to pay off a credit card balance when making minimum payments only.
Overall, I think these changes are a good thing. They offer consumers more protection. Plus, the enhanced disclosure on account statements shows consumers the real cost of debt.
What do you think of Credit Card Reform? Please share your thoughts in the comments.
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