As of August 20, credit card companies have to change the ways they do business with you. The changes are being touted as an advantage for businesses that use cards. Still, you’re going to have to be on your toes to get the best deal.
First, a rundown of the immediate changes signed into law by President Obama:
- Old: Card issuers had to mail bills to holder at least 14 days before the due date.
New: Issuers have to mail bills at least 21 days before they’re due, lessening the likelihood of late payments and fees.
- Old: Issuers had to notify holders about changes in terms at least 15 days before the changes took effect.
New: Holders have to be notified at least 45 days before changes take effect.
- Old: Card holders who were hit with changes and fees had to swallow the changes and pay under the new terms, unless the issuer voluntarily offered an opt-out.
New: Card holders have the right to opt-out of interest-rate and fee increases and the right to cancel their accounts while paying off the balances under the old, lower interest rates.
In February, we’ll see more sweeping changes, including:
- Banks will have to spell out on a statement how long it will take you to pay off a card making only the minimum payment and how much interest that will cost.
- Card companies will be barred from raising interest rates on existing balances unless the cardholder is at least 60 days late making a payment. Then, if the cardholder pays on time for the next six months, the old rate must be restored.
- Fees for paying by phone will come to an end.
- Marketing cards to students and young adults will be restricted by law.
Staying on top of it
You or someone in your finance office will have to take a solemn vow to read the fine print that comes with credit-card bills if you plan to take advantage of the new laws.
For instance, the new 45-day notification on changes in terms is great — if you pay attention to the correspondence from issuers. In other words, they’re required to let you know well in advance, but if no one reads the notification, there’s no advantage to the holder.
With the added week being given to pay off the bill, will your finance office fall into the trap of saying, “Oh, now we have plenty of time”? That attitude could result in killer late fees. Most experts suggest that you keep the same method and timetable for paying the bills when you had only 14 days, and that you use the one-week cushion only for emergencies.
So keep in mind that a lot of the changes involve giving you more time and better access to disclosures about your options. Card issuers will still be free to enact heavy fees and rising interest rates to those who aren’t using cards wisely.