Credit Card Holders Bill of Rights

Credit Card Holders Bill of Rights
The most significant overhaul of the credit card industry will be voted on Thursday.  The 1000 page plan is designed to give consumers a break with late fees and defaults.
The following information was provided by J. Derieck Hodges with Financial Planning Advisors, Inc.
Congress is voting on Thursday to reign in controversial credit card practices.
The proposed law, which has received overwhelming support from consumer groups, would:
  • Prohibit banks from raising the interest rates on pre-existing credit card balances unless a payment is over 30 days later.
  • Eliminate practices where credit card companies apply payments in a way that maximizes interest penalties.
  • End double-cycle billing, which averages out the balance from two previous bills. Double-cycle billing has allowed credit card issuers to charge consumers with retroactive interest on their previous month's bill - even if they've already paid that off.
  • Credit card payment would be applied to higher-rate balances first to reduce interest penalties and fees.
  • Due dates and time would be very clearly indicated as well as any changes to the account.
  • Probably one of the greatest benefits is the elimination of "universal defaults". This practice allows credit card issuers to increase the interest rate on one card if a customer misses a payment on another card.
The proposed rules are expected to take effect by 2010.
One caution about these changes. Credit card issuers may increase other fees or limit the amount of credit with these changes. They argue that getting away from charging higher fees to late payers means they have to spread these costs to all cardholders.