The US Congress passed into law on the 20th of August a new set of credit card laws many experts have posed to have drastic effects on ensuring the average credit consumer is less tied to issuing card companies. For one these experts have concluded that these laws once in effect will become a breath of fresh air to the millions of credit cardholders who struggle to pay monthly balances in full. On another note, the law also reduces the power of credit card companies in certain regards allowing consumers greater control over their resources in the long run. We decided to highlight the new law under the following criteria.
The new consumer protection law highlights an increase in the grace periods on credit cards. Card companies must now have at least 21 days of grace for cardholders to pay up. This is a relative increase from the previous legal requirement of 14 days. With an increased grace period cardholders who are not able to pay up for some reason before the due date will have at least an additional 21 days to do so.
Under the new law credit card companies must notify cardholders of any increase in interest rates at least 45 day before they take effect. It also limits the powers of creditors to increase rates and impose fees.
For credit cardholders the new credit card laws of 2010 are more of a blessing than a curse. A longer grace period to pay off debt before default rates take effect, and less power for your card company to charge exorbitant late penalties, the effect of this law is highly anticipated when it takes effect in February 2010.
Impact of the new consumer credit card protection law on credit card companies
While the new law may be good for the consumer, credit card companies criticize the law for its effects on corporate profits and many have sought to bolster their profits by introducing annual fees or raising annual fees on their credit cards. Chase introduced an annual fee to many customers on its freedom credit card. While Pro industry experts argue that card companies must find a way to garner profits since they can’t always rely on cardholders to pay their balances in full. They estimate that an annual fee free credit card surmounts to a free service provided by the credit card companies, a free service that probably amounts to losing revenue in many cases when considering the fact that these companies bear the burden of processing the transactions.
Minimum Payments Going Up
Another angle drawn from the argument is that credit card companies are now choosing to raise their minimum payments. The new consumer protection law prevents card companies from raising minimum payments at any given time by more than 100%. Some credit card companies have sought to increase their minimum payments as another way to bolster profits.