New Credit Card Rules And Regulations

New Credit Card Rules

According to Demos, a public policy research organization, the recently issued rules will ban some of the bait-and-switch tactics in credit card lending. The new rules will:

• Prohibit banks from retroactively increasing the interest rate their customers must pay on existing balances
• Prohibit banks from allocating payments to lower-rate balances first to maximize finance charges
• Ban the practice of "double-cycle billing," which calculates interest over more than one month, and can result in higher finance charges
• Eliminate upfront fees on so-called fee harvesting credit cards when they eat up the majority of the available balance on the cards

What still needs to be done?

While the new rules will provide important new protections, more safeguards may be needed to address other lending practices that can make it difficult for consumers to manage their credit.

According to the Consumers Union, other reforms needed to address some of the abusive practices that hurt consumers are:

• Limiting the amount of "penalty" interest rates, and how long card companies can keep you at these extremely high rates.
• Prohibiting fees for paying a credit card by phone or internet.
• Prohibiting account-opening fees no more than 10 percent of the credit limit.
• Banning multiple over-limit fees during a single billing cycle.
• Require banks to provide consumers a reasonable amount of time to make payments.

How do these new rules affect me?
These new rules are a positive step in the right direction for consumers. Once you complete your debt settlement program, these regulations may help you make a fresh start as you strive to rebuild your credit rating. Keep in mind that it will still benefit you to practice prudent credit card use. Avoid additional interest and fees by only charging what you can afford to pay in full that month. Timely credit card payments may slowly improve your credit score.