Possible good news for credit card users from the Fed on Thursday
Filed under: Debt
You may see the credit industry reigned in on Thursday if the Federal Reserve approves, as expected, new regulations that have been considered since last May under the title "unfair and deceptive practices." In addition to the Fed vote, approval is expected from the Office of Thrift Supervision and the National Credit Union Administration. All three must approve the plan.The Chief executive of the American Bankers Association, Edward L. Yingling, told the Washington Post, "It covers a lot of issues and is really unprecedented in its scope. You add them all up, it's going to mark the beginning of a new market."
So what will these changes mean for you? Let's look at two major changes that will help you to reduce the interest you pay on your credit cards:
- * Ban on raising the interest rate on existing balances unless the customer was 30 days or more late in paying the minimum. Avoid paying the minimum late and you won't see your interest rates jacked up to 25 or 30 percent. Right now credit card companies have been increasing rates on people just a few days late or on people who made a late payment on another card. Banks can still increase rates if the card has a variable rate or a promotional rate set to expire.
- Change the way credit card companies apply your payment. Right now most credit card companies apply the payment to the balance with the lowest interest rate. Thereby allowing balances with higher rates to build up interest charges. With the new rules banks would be prohibited from applying the entire payment to the balance with the lowest rate.
We don't know at this time how quickly these changes will take effect. The industry wants about two years in order to have time to reprogram their computers and change practices. Consumer advocates want the changes to take effect as quickly as possible. Right now the best guess is that the Federal Reserve will give the industry about six months.
The sooner the better. This will go a long way to helping consumers get out of the debt hole they now face. Some Democratic Congressional leaders do not think the new rules go far enough to protect consumers. Expect new legislation when the Congress reconvenes in January.
Lita Epstein has written more than 25 books including the "Complete Idiot's Guide to Improving Your Credit Score."
Reader Comments (Page 1 of 2)
12-15-2008 @ 8:40PM
shawnie said...
wow! It dosen't take them six months to raise our rates.........greedy, the way I see it!
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12-16-2008 @ 1:10PM
Michael whiteaker said...
Greed has destroyed the american dream!!!
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12-17-2008 @ 10:33AM
JWimbley said...
Agree. Guess what? Many of us have plenty "Available credit" but opts for Zero balance and CLOSED accounts as fast as we can. Fleece cards are OUT cash will be King again!
(They realize this and now offer Cash Cards" @ $9.95--but, with re-fill caveats. Sorta like Pre-pay phone cards. )
12-16-2008 @ 1:44PM
JIM LEE said...
I called my credit card company and said I could not make my payment this month and would you work with me for a month or two? I have fixed income SSDI am disabled .......They said " You knew the rules coming in and your next payment will have late charges plus.........
They don't want to work with me......that's how things start snowballing.......once behind, you can never catch up.
I'm not a bad person but they will end up making me out as the dead beat.
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12-18-2008 @ 7:53AM
Frank Shepardson said...
Jim I am in the same boat as you are.I have been disabled since 1990 and ever since the Education Department has taken ever month $154.00 from my SSDI.that leaves me with $723.00.Rent and utilities are $550.00.but they don't care as if it comes out of their pockets.I set up a bank draft to send money to my credit card holder every month on the 5th.THEY agreed to this and so my bank set it up.On the 2nd month they were denial of the brokard agreement between us.It seems like I just fall thru the cracks.Hang in there Jim, there will be justice. Franko
1-06-2009 @ 3:11PM
BJ said...
I have to say if the credit card sharks didn't increase my rates for no reason and lower my credit limit i would be able to pay a lot more then the minimum and i didn't know that WAMU was such a crooked company when i got the card i thought if i defaulted they might do all the dirty tricks they did and it makes me mad when they say we knew when we got the card if i had known there would be no way. They do everything to mess you up so you will pay a $39.00 fee. I have called them several times to ask if they could lower my rate and they said you can't call and ask any time for a lower rate yes you can and sometimes other banks will not the WAMU loan sharks.
12-17-2008 @ 9:04AM
Roz said...
Has anyone received a letter from the credit card company to have their credit line limit decreased?
My husband and I pay the bills on time never past due and sometimes we pay more than the amount due, yet the card company decreased our credit limit, when the company does this it lower our credit score.
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12-17-2008 @ 9:10AM
Lita Epstein said...
Roz,
Unfortunately, credit card companies are doing this to a lot of people who pay on time in order to reduce their risk exposure. And, you're right, it will lower your credit score because your debt utilization ratio will go up. The only way to turn this around will be to pay more down on your credit cards.
Lita
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12-17-2008 @ 10:01AM
JWimbley said...
I totally agree with Shawnie. Trust me, IF they can change--so have WE . We stopped Trusting these GREED machines and opted out of re-using AVAILABLE credit on card as we push toward zero balances. They have hurt enough of us to hurt back. Their "futures" income WILL be adversely
impactedwhen "shopaholics like me continue to move to ZERO balances. Stores we supported with our purchases are closing. Those robber barons must be in cahoots with Osama bin Laden, whose stated GOAL was to "Wreck US Economy" I call them TRAITORS!" of worst kind. Without drama of bombs,effect has same effect or worse. Closed businesses, banks,lost our jobs,destroyed credit "Ratings" and Ruined XMas 2008!
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12-17-2008 @ 10:46AM
Lita Epstein said...
JWhimbley
If you are going to work with a cash card or prepaid credit card, be sure you take a close look at the fine print. Most have monthly fees and some have other charges. Some even have time limits for use.
Lita
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12-18-2008 @ 7:52AM
VINCENT said...
I STOPED CHARGING ON MOST OF MY CARDS UNFORTUNATELY I HAVE SEVEN FROM YEARS AGO ABOUT 10 AND HAVE BEEN PAYING ON TIME FOR YEARS. BUT MY INTEREST RATE IS STILL HIGH I KNOW I HAVE PAID MY DEBT BACK MORE THAN THREE TIMES OVER. AND I KEEP PAYING. THEY ARE WORST THAN LOAN SHARKS. LAST MONTH I WOULD HAVE BEEN LATE ON A PAYMENT AND WOULD HAVE BEEN CHARGED A LATE FEE. AS LUCK WOULD HAVE IT I FOUND OUT ON THE DUE DATE THAT MY PATMENT WAS NOT RECORDED SO I PAID BY PHONE AGAIN I WAS CHARGED $15.00 FOR PHONE PAYMENT. AND THE TRAVASTY GOES ON AND ON. DO NOT THINK FOR ONE MOMENT THAT THE CREDIT CARD COMPANIES ARE GOING TO CHANGE ANYTHING WITHOUT A BIG FIGHT. THEY ARE ALLOWED TO DO ANYTHING THEY WANT IT THE LAND OF MILK AND HONEY FOR THEM.
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12-18-2008 @ 12:12PM
jan said...
This is long overdue. Why do we have to wait until 2010. ? It should be made effective immediately. I have excellent credit, low balances to limit
and excellent payment history. AMEX decided that because there was one erroneously reported late to a store (which has now been taken off and corrected) to freeze my credit lines and preent me from charging on my flexible payment option. this causes all the creditors to re evaluate
my interest ra tes across the board and my credit scores to go down. These people have our whole lives in their hands--one t hey give you a bad mark on your credit no one will lend to you--and its hard to get a decent job. their arbitrary power has to stop.
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12-18-2008 @ 6:27PM
Marc said...
Advanta(the whores) charge me 35% interest rate and may cause me to go bankrupt. My business can't fight the economy & Advanta. This is why the country is in kaos, credit companies.
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12-20-2008 @ 8:00PM
Nanny said...
Because this doesn't go into effect until 2010,hold on to your wallets! Gee, I wonder if there is going to be a year of raising rates and lowering limits-watch. Remember, these crooks can raise your rates at any time for any reason. How do these idiots sleep at night?
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12-23-2008 @ 8:54AM
willie said...
In the twentys and thirtys the would have been thrown in jail for loan sharking. Congress needs to get it done!!!!! now!!!!!
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12-24-2008 @ 6:36AM
Howard said...
PEOPLE WE NEED TO STOP PAY ON OUR CARDS, IF THAY DON'T GET ANY MONEY THAY FAIL THAY DON'T WANT THAT, THESE COMPANYS WILL LISEN IF WE ALL TAKE A STAND, I'M NOT SCARD I HAVE NOT PAYED ON MY CARDS IN 5 MONTHS AND I WON'T UNTIL THAY DO WHAT A SAY IF NOT THAY WILL NEVER GET ANOTHER DIME FROM ME WE MUST TAKE A STAND NOW OR JUST BE A (OKAY WHAT EVER YOU SAY I'LL DO)STAND UP FOR YOUR SELF AND FIGHT FOR YOUR RIGHTS.
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1-10-2009 @ 7:04PM
Joyce said...
Howard if you dont pay your credit cards bills they are just going to add more to your debt and late fees. Is this better or worse.
12-23-2008 @ 9:29PM
Howard said...
PEOPLE WE NEED TO STOP PAY ON OUR CARDS, IF THAY DON'T GET ANY MONEY THAY FAIL THAY DON'T WANT THAT, THESE COMPANYS WILL LISEN IF WE ALL TAKE A STAND, I'M NOT SCARD I HAVE NOT PAYED ON MY CARDS IN 5 MONTHS AND I WON'T UNTIL THAY DO WHAT A SAY IF NOT THAY WILL NEVER GET ANOTHER DIME FROM ME WE MUST TAKE A STAND NOW OR JUST BE A (OKAY WHAT EVER YOU SAY I'LL DO)STAND UP FOR YOUR SELF AND FIGHT FOR YOUR RIGHTS.
Reply
1-21-2009 @ 6:40PM
deb said...
i agree, all i pay each mt just goes to interst anyway so whats the use i am never late but iam tired of paying them at this rate it will take me 10 yrs to pay them off.,some of mine even lowered my limit.
12-25-2008 @ 5:38AM
ROGER said...
I JUST PAY CASH FOR MY JUNK. IM RETIRED . AND DON'OWE ANYTHING, THANK THE LORD FOR THAT .
MERRY CHRISTMAS TO ALL.
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