Long overdue rules go into effect today to eliminate some of the worst credit issuer abuses. We’ll see:

• Payments due the same date each month.
• No double-billing.
• 45-day notification of rate or other significant changes.
• No interest rate increase for the first 12 months (excluding variable-rate cards, the expiration of teaser rates, and delinquent payments).

But we’ll also see an increase in interest rates, annual fees, “processing” fees, and even — lookout — fees for inactivity on accounts.

The most intriguing change will be the minimum-calculation math. In new statements we’ll see a chart showing how long it will take to pay off a balance forking over only the minimum, how much interest we’ll pay over that time period, and how much we could save paying a higher monthly bill. (It will tell us how much to pay in in order to pay off the account in three years.)

One of the most important rule changes is that credit issuers now have to allocate any money above the minimum payment toward the highest-rate balance first. So if your minimum payment is $100 and you send $150, that $50 will go to balances you might have for convenience checks or cash withdrawals — whichever rate is highest.

To get around this rule change, said one issuer I talked to last month, many will increase the amount of interest used to calculate the minimum payment. Check out this Bankrate calculator to see what I mean: Instead of calculating the minimum as APR plus 1% of balance, he said, many will add 2% to 5% instead.

In July, issuers are supposed to include information on how all interest rates are calculated on accounts and how they affect our payments.

Count on one thing staying the same: Doesn’t the man always get his money.

No related posts.

Tags:   CARD Act · credit cards · interest rate · minimum payment calculation1 Comment