Understanding The New Credit Card Laws

Beginning in January 2010, credit card companies were required to conform to a new list of rules set out by President Barack Obama

. These rules were the first in several decades to require lenders to supply their cardholders with information and options about managing their debt.

Credit card debt is something that plagues millions of Americans. Households with credit cards carry an average debt of almost $16,000, with interest rates around 15 percent. To make matters worse, these numbers are offered on top of a housing market that currently provides few chances for financial gain as well as one of the highest rates of unemployment in U.S. history.

Fortunately, the new laws give consumers a chance to better understand their debt and what they can do about it. They also make it more difficult to get credit cards, and reduce the "incentives" like points and rewards, which often entice users to get cards they neither need nor can afford.

What the New Credit Card Changes Include

Although there is still plenty of fine print and legal terminology to muddle through, some of the biggest and most impactful changes include:

- Interest rates can only go up with 45 days notice and for documented reasons, including when a promotional rate changes, the card has variable terms, or if the cardholder is late on a payment.

- Due dates on payments cannot be moved up without advance notice, and can only be due as early as 21 days after the statements are mailed.

- Payments made on a weekend or holiday cannot be held liable for late fees just because the credit card company is closed on that day.

- If you have a card with two different balances at two different interest rates, payments above the minimum amount due are put toward the larger interest rate first.

- Fees for going over the limit on the credit card can only be imposed after the cardholder "opts in" to that service.

- Credit card bills provide a full disclosure about the state of the debt. Credit card companies must clearly state how long it will take to pay off the balance if payments are made at a minimal level, as well as just how much interest will end up being paid in all. Additional information must be provided on how much cardholders have to pay to get the card cleared within one, two, or three years.

Getting out of debt is one of the most important steps you can make in creating a sound financial future. Although almost all financial advisors place a heavy emphasis on opening brokerage accounts or developing retirement plans as a way to increase your family's financial stability, most individuals need to first get out of credit card debt or come up with a solid plan to eliminate the debt within the next five years before it makes good financial sense to start investing.

If you're ready to start eliminating your credit card debt or would like to develop an investment plan that takes your credit card debt into account, it's a good idea to meet with a financial advisor who offers a full range of consultative and brokerage services.

by: Wesley Watkis

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