If you have any credit cards… you definitely should read this…
As you may already know, the new credit card laws went into affect yesterday. I know that our ultimate goal is to NOT carry debt on credit cards. However, my background is in finance and accounting – I know the reality is that most people do. So if you are carrying a credit card debt, there are some very important things you need to know about the new laws.
I highly advocate being credit card debt free – however, I do use credit cards on a monthly basis. Credit cards are not inherently bad, however, they can lead to bad situations. I use my American Express for just about every major purchase – the reason – they double my manufacturers warranty on every purchase. So yes, I pay $50.00 per year membership charge – however, American Express replaced my laptop when it died at 14 months old – with the extended warranty. American Express also has provided me with emergency hotel accommodations when my flight got cancelled, for free.
So my point is this: Use credit cards judiciously. Pay them off at the end of the month. Don’t have 50 of them. Choose one solid card with great benefits such as cash back, rewards and use it wisely. If you cannot afford to pay it off at the end of the month, don’t use it. Don’t carry a balance longterm.
I know that some of you would love to be debt free today, but can’t. I know many of you are working on it slowly, but surely. If you have no other option than to have a credit card balance, shop you rates. Keep them as low as possible, pay as much as you can each month on the highest interest rate cards… and know these laws.
Click below to read the new laws…
1. Your credit card company can no longer change their rates in the first year. You must get a 45 day notice on rate change. Rates cannot be raised unless your account is 60 days past due.
2. Annual Service Fees are capped at 25% of your credit limit during the first year of use.
3. You are to be given 21 day grace period to pay your balance off.
4. You must agree to exceeding your credit limits before you can be charged a fee. Fees are limited to one per bill.
5. Your statement will now show you exactly how long it will take you to pay off your balance with just a minimum payment. This number can be scary. Pay close attention to it. Adding just a few extra dollars a month can change this number drastically.
6. You may now opt out of interest rate changes and pay your old balance off at the old interest rate. So if you get a letter stating that your interest rate is going to raise by 8%, you have the opportunity to close out the card and pay your old balance at the lower rate.
7. If you are under 21 you must have a cosignor or valid proof of your income to qualify for a credit card.
Another thing to be aware of, your credit card may add new fews to cover the losses from these fees. Pay close attention to this.
Questions… leave them in the comments..
P.S. Negative comments about people who have credit cards will be deleted. I am not judge, nor jury and do not want people to feel as though they are being admonished with this post, that is NOT my intention. I am providing information for those who need it. Thank you for understanding.
We canceled the card after they raised our rates like that. We used the card to replace items that had to be replaced before the insurance money came in.. like windows… doors… hot water heater… and my clothing. So we pretty much maxed it out knowing when we got our insurance money we would pay it off. One month our minimum payment was $230… them 2 months later it jumped to $700… I told the guy on the phone I couldn’t pay it. I explained what had happend, the bank branch manager and her boss both called the credit section and they were told there was nothing that could be done. It pretty much shocked me into realizing CCs are simply for emergencies and while emergencies include the break-ins we’ve suffered I’d always use my Visa (1st financial), who even though they had the same problem with the payment 2 days late they helped me fix it. I’ve had that card since I was 18 and needed to buy my books for my last year of college. They’ve actually been pretty good about working with people here in Detroit.
Dizzy,
Everyone’s situation is different and how you use credit cards has to be what is best for your family.
We all have to eat, have shelter , etc. Sometimes credit cards make this possible.
Good Luck hon.
My comment was supposed to be a reply to Shannon’s reply to me. :( Oops! Not sure why that didn’t work.
Yeah, I agree with you 100%! I hope I didn’t sound holier-than-thou in my comment. I was raised in a home that occasionally had credit card debt due to adverse circumstances, but we were taught pretty clearly to avoid it at all costs…and have been able to.
However, I know not everyone has that teaching/influence and I know that some people simply have no other alternative and I want to be gracious about that.
You are old, huh? Grin…I don’t know you, but I REALLY don’t think you are old from what I’ve figured out!
Lydia,
Old. I promise. :)
I noticed that you were talking about 5/3rd bank. I read that they would now be charging a $19 inactivity fee every month! That is scary!
Yep. That is crazy! :)
The under 21 thing kinda irritates me personally. I was done with college at 19 with a bachelors (I started college while still in High School). I got married at 19 also… and had my son that same year. While I wouldn’t mind proving my income I think assuming all people under 21 are irresponsible is kinda discriminatory why not require everybody to prove income. That being said… I know lots of people who late into there 20s have gotton into big trouble with CC debt. My husband and I have CC debt because of his ex wife. She stole his identity and the police are no help… unless its somebody out there stealing all kinds identity.. they told us they had bigger things to worry about. We also have 3 disabled children so have had to charge for there speech and psych. care.
My big thing is all of my cards (3) have massively raised my Minimum payment.. each letter I’ve received doesn’t allow you to opt out of that. They also state bluntly that its the new laws that caused this. I always would pay the min. in the winter because it was a total of about $250 a month give or take how many doctors appointments my kids had. Then during the summer months when the utilities went way down and I wasn’t driving as much I would pay much higher amounts and bring the debt way down I’ve even cleared it a couple times. Now though I figured it out with the guy on the phone from Visa my minimum payment will be $250 a month from them… Mastercard will be $200… and our card for emergency furniture purchases (again my daughter (adopted) has sever PTSD and my husbands ex has broken in on several occasion and destroyed ) everything) anyhow… that will be going up to $75 a month give or take.
I do like how they have to give you notice of rate hikes and 60 days late to raise your interest rate. When we were ransacked last year 5/3rd bank froze all our accounts for 4 days… during that time the 5/3rd card payment was due. The lady at the bank called the credit office section and told them what happened it was paid electronically the day our accounts were reopened. Low and behold 2 months later without notice we went from a 9% rate to 32% percent rate because we changed our account numbers at the bank and missed the payment by 2 days… even though it was the bank who froze the money. I just dont know what I’m going to do during the winter with the new minimum payments.
I agree with Sarah…you did a great job of not being judgmental and at the same time being helpful. We do the exact thing you do Shannon and use credit cards to get rewards etc. but we always pay them off every month. God has blessed us financially however we also know sometime we may have to put more on credit than we like, but we hope and pray that never happens and will do everything we can to avoid it.
Katie, congratulations! Way to keep at it! We’ve never had credit card debt, but I personally can’t wait until we have our house mortgage gone…it will have to feel WONDERFUL! And S. Carter, you can do it! When I read your comment I found myself saying “Hurray for her resolve!” Those little baby steps really do make a difference in the big picture.
Lydia,
I have been in credit card debt and lots of it. When I was a college student, I virtually lived off credit cards, I literally would not have ate if I didn’t have credit.
I got into a ton of debt this way. So for me, seeing that the credit card companies cant set up shop in the student lounge at a college makes me happy.
I paid my credit card debt off a long time ago now (because I am old) but I still remember the sting of getting that big bill every month…
I too would like to thank you for posting this. I am very excited, and scared to see that new how long it will take to pay this off feature. There isn’t a year that doesn’t go by that we don’t take our tax returns and put it towards a credit card. We have 3 and I recently cut one up. My goal by the end of this year is to pay off the one I cut up, and reading this really makes me want to do it! Thanks again!
Kudos to you for cutting up a credit card. HUGE STEP!
Thank you so much for the info! My husband and I got into cc debt last spring when our dog had an emergency vet visit (OUCH), at the same time we moved and had counted our eggs before they hatched and took out our new deposit from our cc, and we found out that the university my husband was attending had messed up his tuition and we ended up having to pay cash/cc. All of this happened within 2 months. We used all of our savings before turning to CC, but we just didn’t have that much!
We finally paid off our debt in October and I can’t tell you how good it feels to be debt-free and it’s largely due to me finding your blog in July! Thank you so much for this info and your hard work!
Katie..
WOOHOOO Congrats. Getting out of debt is HUGE! It can be done just takes lots of patience and hard work.
What exactly does the 21 day grace period mean? I thought my credit cards always had a 25 day grace period to pay off any purchase, before they would start charging interest. Has the number of days decreased, or is it just that now every single credit card out there HAS to allow you 21 days, whereas maybe before they didn’t?
Erin,
Yes that means that they must give you atleast 21 days – they didn’t have to before and many companies manipulated the days.
I wish those laws were in effect when I was in college…Stupidly, I got a couple cc when I was 19 or 20 and that has cost be big time! I really wish that there was that new law back then because most likely I would be sitting in a lot better position.
Thanks so much for the post! My husband and I are in the middle of working to become debt free and I really appreciate the info!! Very helpful!
Loved the post… thank you for sharing…
I just got my first ‘real’ credit card last month… american express… but it is mainly for business use only… I have already paid the bill 4 times since I kept maxing out my limit…
I would suggest to anyone who can feasibly do it, to make an automatic bill-pay to your CC if you are paying the minimum only… that way you can forget but the bill still gets paid on time…
Laura..
Excellent idea. Automatic payment is a great option so that you arent tempted to not pay and carry a balance.
Thank you for the reminder & sharing info. You hear it in the news etc., but you delivered in a coherent efficient way. Thanks!
I can’t imagine anyone being insulted by this– I thought it was written well and not judgmentally. Regardless, I appreciate you sharing the information– I was aware of the changes (I read a lot of news sitting in front of a computer all day at work), but am glad you took the time to help inform others! Thanks!