Monday, May 5th, 2008
Credit Card Reform
There’s some really good news on the horizon as the Federal Reserve proposes a series of reforms for credit cards and overdraft services that will definitely help consumers.
Highlights of the reforms include
- Banks would be prohibited from increasing the rate on a pre-existing credit card balance (except under limited circumstances) and must allow the consumer to pay off that balance over a reasonable period of time.
- Banks would be prohibited from applying payments in excess of the minimum in a manner that maximizes interest charges.
- Banks would be required to give consumers the full benefit of discounted promotional rates on credit cards by applying payments in excess of the minimum to any higher-rate balances first, and by providing a grace period for purchases where the consumer is otherwise eligible.
- Banks would be prohibited from imposing interest charges using the "two-cycle" method, which computes interest on balances on days in billing cycles preceding the most recent billing cycle.
- Banks would be required to provide consumers a reasonable amount of time to make payments.
The proposal is open for comment for 75 days, starting May 2, 2008.
To read the information on the Federal Reserve Board site and to submit your comments, click here
Topics: Financial News |
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Good Blog. I will continue reading it in the future. Nice layout too.
Aaron Wakling
[...] Yielding Wealth | Personal Finance wrote an interesting post today onHere’s a quick excerptThere’s some really good news on the horizon as the federal reserve proposes a series of reforms for credit cards and overdraft services that will definitely help consumers. Highlights of the reforms include Banks would be prohibited from increasing the rate on a pre-existing credit card balance (except under limited circumstances) and must allow the […] [...]
Thanks for the info, Joan. Although I don’t have time to read bankrate’s newsletters lately, I have made time to read yours, and all I can say is YES! (and it’s about damm [sic] time!) I don’t agree that all those conditions are necessary or even good (about the promotional rates….I think it should remain as is, but for people who have trouble reading the fine print, I believe the companies have been taking advantage of the situation. They should be able to do as they do now, but they should have to stipulate that they’re paying the smaller rate balance portion first a minimum of 3 times during the offer and it should have to be in a size font a few sizes larger than the offer and should be a separate statement signed at least twice by the card holder accepting the offer. In other words, it needs to be very, very obvious and very, very clear and repeated until a reasonable sober literate human gets it. Including an example of how this would work, would also be a great and helpful condtion. I’ve spent years explainig this to people and of keeping track of my promotional rates balances to get them paid off, but I’ve really put those 0% and 2.99% rates to very good use and don’t want to see them stop offering them).
I don’t think that we should try to weigh things in FAVOR of the consumer, I think the Fed just needs to start looking out for reasonable protections for the consumer and most of the conditions listed above would do that. For years the banks have weaseled money that didn’t belong to them from their customers, and that garbage has to stop. In fact, all unethical practices in business have to be taken more seriously. Still, we have to make sure that businesses can make money and in some cases, lots of it, as long as they’re honest and forthright.
Again, Joan THANKS.