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The Credit Card Act of 2009 includes assorted compromises reflecting banking industry concessions that accompany supersized campaign contributions to legislators. The junk in the bill jumps out at you, when you read through the text, although any smooth-talking politician could spin it all into an air-puffed benefit. Amid the political maneuvering through verbiage, we do find some real improvements for you, the customer. Two of those positive changes went into effect this week.
The good news:
- Beginning on August 19, 2009, you now have 21 days from the date your credit card statement is mailed until the date your payment is due.
- You must be given 45 days notice before your interest rate or any other significant change occurs with your account.
The bad news:
- Your payment must be processed by your credit card company by the due date. It will not matter if it was postmarked ten days earlier and got “lost.” There have been complaints that banks held onto payments and intentionally waited to process them until after the due date so they could collect late payment fees. Now those fees are heftier then ever and growing. If you can, avoid the mail. Use online bill pay. Make a copy of your online payment receipt and keep it in a file with your bill so you have proof of payment you can quickly put your hands on if you need to dispute a fee.
- Financial institutions must inform you 45 days before your interest rate will change and you now have the ability to opt out of that change. If you opt out, you will not be able to use that account in the future so you will need to find a new credit card provider. While what happens next gets glossed over whenever this is discussed, the lender will obviously cancel your account if you opt out. You want to avoid any notation on your credit reports that says “account closed by creditor.” You take credit score hits when this happens. And when an account provides positive credit history, it’s contributing to the one-third of your credit score represented by your credit history. You want that account to remain open for your benefit. If you have good to excellent credit, apply for a new credit card with a lower interest rate. Opt in to the new interest rate on your old card and keep it open. Charge, and immediately pay off, one small purchase each month to keep the old account active without paying interest. After you have a couple of years of history on your new credit card, close the old one, knowing you used it to your advantage.
Shortly after President Obama signed the Credit Card Act of 2009 last May, I began receiving email from outraged readers who pay on time and use credit responsibly. However, their interest rates spiked to double their previous levels and cards were cancelled after balance rate increases from the same institutions that our tax dollars bailed from financial failure. I’ve heard a lot of anger about the treatment consumers and small business owners have experienced.
The bulk of the new Credit Card Bill changes go into effect in February, 2010. It offers several significant improvements that will make the workings of financial institutions more visible to the public. However, it does nothing to limit raising interest rates to any level a bank desires; there is no ceiling on astronomical charges for fees; and there is no requirement to inform you that using more than 50 percent of your credit limit causes your credit scores to begin dropping. In addition, there is no way to opt out of allowing your debit card to process a transaction when you don’t have funds to cover the purchase, with quite a hefty fee attached after you make the purchase. Recently, I’d moved funds around online and forgot what I did, when I stopped to buy a small amount of gas. It never occurred to me that I’d be allowed to make a purchase with a debit card if funds were not available in the account. With the overdrawn account fee, that gas cost me $11.25 a gallon. The lack of customer care by major financial institutions causes me to continue to urge you to establish a relationship with a local bank or credit union.
Pay attention to everything you receive in the mail from your credit card issuers. Don’t trash something, presuming it’s junk mail. Read those boring documents with four point type. If you believe your bank is violating rules, contact the Office of the Comptroller of the Currency, the agency which regulates banks. Or call them: 1-800-613-6743.
Did you use personal credit to qualify for a “business card?” You are probably using a personal credit card for your business expenses. And your credit history is probably being reported in your personal credit history rather than to business credit reports. While the Credit Card Act of 2009 contained no relief for businesses with commercial credit cards, if your small business actually uses a personal account for business purposes, you will benefit from all the changes included in the Credit Card Act of 2009.