Is this good news for consumers or more of the same old "stick-em-up" practices of the powerful and greedy credit card industry?
The new laws that are set to take place today will give us consumers a bit more information, but no real relief from heavy interest rates and ridiculous fees. The credit card issuing banks must now give us 45 days notice when they decide to make a "major change" to our accounts. This would include a change in interest rates or any new fees. One bright spot, the credit card issuers will not be able to count a payment as late unless our bill was sent a least 21 days before the due date.
But, there is always the "fine print" we must make ourselves aware of. What you and I would consider a "major change" and what the credit card companies consider major changes are miles apart. Yes, they must now let us know about a rise or decrease in our interest rate, but under the new program, lowering your credit limit is not considered a "major change"!
Yes, you may want to go back and re-read that last sentence.
Lowering our credit limit and available credit which IMMEDIATELY will impact our FICO Score is not considered a "major change" by the credit card companies. This means that unless you are proactively monitoring your FICO Scores, you won't know that your scores are being impacted by a change in your available credit and debt / credit ratios. You will now be considered a riskier customer because your ratios have been whacked! Good thing the credit card companies don't think that this is a major change that we need to be aware of.
As a reminder, your FICO Scores aren't only important if you are trying to purchase a home or finance a car. Those readers of my Crushing The Credit Bureaus book know that your insurance rates, utility bills, cell phone plan, cable TV service and many other items are credit score driven and you will be charged more if your scores are low.
A representative from the American Bankers Association was quoted as saying that "it doesn't make sense for issuers to warn consumers because of their" natural and tempting reaction " to use these credit lines before they are lowered or closed."
WOW … does anyone else find fault in that statement?
Unfortunately, all of this legislation won't go into effect until February 2010. I like the fact that credit card companies won't be able to "market" (prey upon is more like it) and issue credit cards to individuals under the age of 21. This should curtail much of the marketing to college students and bring about some change to these early consumers getting into financial trouble.
Let's Wrap This Up …
So as you can see, there are many myths disguised as truths when it comes to credit and credit repair. There are also hidden secrets that the credit bureaus don't want you to know. I hope that since you are now armed with this knowledge, you won't fall victim to false information that exists out there.
Your Credit Score Insider,
Mark J. Garcia