what you need to know: new credit card rules
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What You Need to Know: New Credit Card Rules. Yvonne Cooper Division of Consumer & Community Affairs Federal Reserve Board - PowerPoint PPT PresentationTRANSCRIPT
What You Need to Know: New Credit
Card Rules
Yvonne CooperDivision of Consumer & Community Affairs
Federal Reserve Board
The analysis and conclusions set forth in this presentation represent the work of the authors and do not indicate concurrence of the Federal Reserve Board, the Federal Reserve Banks, or their staff. Mention or display of a trademark, proprietary product, or firm in the presentation by the authors does not constitute an endorsement or criticism by the Federal Reserve System and does not imply approval to the exclusion of other suitable products or firms.
New law and rules
• New features– Rate & fee changes– Payments– Opt-in for going over
limit– Cards for those under 21
• New disclosures– Solicitations– Account opening– Monthly bill– Change in terms
When to look for changes
Now (some started August, 2009)
February 22, 2010 (new features)
July 1, 2010 (disclosures)August, 2010
Re-evaluation of rate increases
“Reasonable” amounts for fees
Rate & fee changes: advance notice
• 45 day advance notice– Interest rate, fees, other significant
change in terms
• You can cancel and avoid fee increase– Need to get another card
• NO 45 day notice if– Variable rate– Introductory rate expires– Don’t keep up with workout
agreement
Rate & fee changes: first year
No rate increase allowed for first 12 months UNLESS Variable rate Intro rate expires More than 60 days late paying Don’t keep up with workout
agreement
Rate & fee changes: increased rate applies only to new charges
• Old rate applies to existing balances UNLESS– Variable rate– Intro rate expires– More than 60 days late paying– Don’t keep up with workout
agreement– Rate reduced under SCRA and
SCRA no longer applies to you
• Limits on universal default
Rate & fee changes: “cure” for penalty
ratesIf you trigger a penalty rate
ANDIf you make at least minimum
payments on time for 6 consecutive months
THEN your rate should automatically go back down to the “regular” rate for your card
Rate & fee changes: limits on high-fee
cardsFees limited to 25% of initial
credit limit $300 Credit limit $75
maximum feeDoes NOT apply to late fees
and penalty fees
Payments: how long to pay off
Bill will show current balance with minimum payments & pay in 3 years Example, $3,000 balance at 14.4% Minimum payment is $60
If you make no additional charges using this card and
each month you pay. . . .
You will pay off the balance
shown on this statement in
about. . . .
And you will end up paying an
estimated total of. . .
Only the minimum payment
18 years $6,537
$104 3 years $3,713(Savings =
$2,824)
Payments: time to pay
Mail or deliver bill 21 days before it’s due
Due date is same each month (e.g. 15th or last day of month)
Payment cut-off time no earlier than 5 PM
If due date is weekend or holiday, payment is due next business day
Payments: apply to high interest first
Apply payment to highest interest first (e.g. cash advances, then purchases)
UNLESS you have a deferred interest charge (“no interest till March 2012”) Can choose to apply extra amount to
deferred interest purchase 2 months before interest starts,
payments apply to deferred interest purchase
Payments: no double-cycle billing
Only charge interest on balances in current billing cycle Double-cycle (also called 2-
cycle) billing is prohibited
Over-the-limit fees
Opt-in for going over the limit One fee per cycle Not triggered by other
fees or interest In some cases, OTL fee
limited to 3 billing cycles
Credit cards & minors
Anyone under 21 needs: cosigner or proof of ability to pay
Cosigner must agree in writing to credit limit increase
Consumers under 21 can sign up for a secured card
Students and credit cards
• No soliciting–On campus–Near campus • 1,000 feet
– At university event • Ads use words, pictures,
symbols of university
• No ”tangible item”– Intro rate is OK
Disclosures at 4 key points
SolicitationsAccount
openingMonthly billChange in
terms
Solicitations new
disclosure box
What do we want consumers to do?
Solicitations Compare offers Understand multiple interest
rates Understand fee structure
Bills Pay their bills on time Make more than the minimum
payment Avoid avoidable fees --
become aware of fees they are paying
Pay attention to changes
New monthly stateme
nt
New monthly stateme
nt
New monthly stateme
nt
Summary
of fees and
interest
Summary
of fees and
interest
New monthly stateme
nt
Overdrafts
Opt-in for ATM withdrawals Point-of-sale debits
Automatic for Checks Scheduled payments
Effective July 1
Other overdraft options
Link to savings accountOpen overdraft line of creditDon’t overdraw
Gift cards
Limits on dormancy, inactivity, and service fees Minimum of 12 months
5-year minimum expiration date
Gift cards
Excludes reloadable account substitute cards
Excludes award or promotional cards “card with purchase”
Effective August 1
Thank you!
Any questions?