What You Should Know about the New Credit Card Rules and Regulations

Very significant changes in credit card rules and regulations were passed last week, by the Office of Thrift Supervision, a division of the Treasury Department, as well as the Federal Reserve.

These were the most significant changes in decades, and will affect many credit card users one way or the other. The rules were based on feedback from the general public, and over 65,000 comments were received on the initial proposal back in May.

The most significant of these rules, which will take effect in July 2010, may help those in credit card debt (like myself).

Credit card companies will be required to apply any payment above the minimum to the part of the balance with the highest interest rate.

The new credit card rules will allow credit card companies to raise interest rates only on new credit cards and future purchases or advances, rather than on current balances.

These two rules could help people from sinking deeper into debt, even if they are not acquiring new credit card debt. Companies often raise rates on current balances, causing cardholders to get deeper into debt due to the very high rates they are sometimes charged. Any by applying payments to the lowest interest rate purchases on cards as they do now, the higher interest portions are paid off last and accrue interest for the longest period of time.

I am glad to see these common sense changes being made- although I believe everyone is responsible for the debt they incur-it will be nice to see a little more fairness in the way the system operates.

Additional changes to credit card regulations include:

Card issuers must give cardholders a reasonable time to pay, such as 21 days
Credit card companies cannot put exorbitant fees for a card user exceeding his limit
Card issuers will not be allowed to unfairly compute balances, such as by double cycle billing
Credit card companies cannot make deceptive credit card offers

But according to a study by by the law firm Morrison & Foerster, the new credit card regulations could cost the banking industry $10 billion a year.

Now, I certainly don’t feel sorry for them, but you and I both know they will try to recoup that loss, probably by raising interest rates even higher than they are now. But the changes do seem like a good thing in general, by making the rules more clear, and eliminating some of the “credit card companies dirty tricks“, so to speak.

Do you think that the new credit card rules will help the consumer? Or will the credit card industry just think up new ways to keep gouging card users?