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NEW CREDIT CARD RULES TAKE EFFECT ON FEBRUARY 22, 2010
GreenPath Debt Solutions outlines plusses and minuses for consumers
(FARMINGTON HILLS, MI – January 22, 2010) - New rules of the Credit CARD Act take effect on February 22, and will impact all credit card accounts in the United States. While many of the rules will benefit consumers, some may affect how they obtain and use their credit in the future.
Jane McNamara, president of GreenPath Debt Solutions, a nationwide nonprofit consumer credit counseling agency, recently outlined key changes for consumers on February 22.
“One of the big changes that card holders are already seeing is the simplification of credit card terms,” she said. “Many of our GreenPath clients, who were previously confused by pages of small-type that explained what their rights were as a card hold, now have a better understanding of interest rates, grace periods and more,” she said. “Overall, any changes that result in clearer disclosures, lower interest and fewer fees are positive for consumers,” she added.
McNamara went on to list other key changes starting on February 22.
Credit card companies cannot increase interest rates on existing balances unless the account is at least 60 days past due. (Beginning in July 2010, account must revert to original interest rate after 6 months of on-time payments.);
- Credit card companies cannot raise interest rate because you are past due on other accounts. (known as Universal Default);
- Credit card companies can’t charge overlimit fees unless the card holder has given them consent to extend credit beyond the card limit;
- Statements must show how long it would take you to pay the existing balance – and the total interest cost – if you made only the minimum payment;
- Young people under 21 years old can’t get a credit card unless they have a co-signer or proof of sufficient income;
- Statements must include information about at least 3 credit counseling companies for any consumers who have carried a balance within the past 60 days;
- Credit card companies must honor promotional rates for at least 6 months;
- There will be limited fees on sub-prime, low-limit cards.
In addition, McNamara also discussed how the Act will have some negative effects for consumers:
- It will be harder for some people to get credit cards.
- Spending limits and rewards may be lowered.
- Minimum payments will be higher.
- Cards that used to be free may now have annual fees.
McNamara went on to explain that credit card companies can’t solely be blamed for the financial problems of consumers. “People must take responsibility for using credit cards wisely,” she said. “One must exercise discipline and self-control and don’t charge more than you can afford to pay.”
If people need help managing their credit cards, they should contact a non-profit credit counseling company like GreenPath that will help them develop a customized budget and action plan free of charge, and counsel them on their options. McNamara reminded consumers that GreenPath does not work for the credit card companies and are available to help people as a financial coach.
“When it comes to financial responsibility, education is key in this economy,” McNamara concluded. “People shouldn’t feel embarrassed if they are in a bad financial situation. They need to take that first step in reaching out for help.”
For more information about GreenPath Debt Solutions, visit www.greenpath.com or call (866) 648-8122.