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Credit Card Bill Of Rights Update

by Jason Steele

The Credit Card Accountability Responsibility and Disclosure Act of 2009 or Credit CARD Act of 2009 is a federal law passed by the United States Congress and signed by President Barack Obama on May 22, 2009.

Most of the provisions bill go into effect nine months after it was signed, on February 22, however, some will actually take effect tomorrow, August 20th.

Grace Period Goes From 14 to 21

This is huge.   Let’s say for simplicity sake your statement closes on the 1st of the month.   This month, your bank took their sweet time mailing your statement with the obligatory reminder that you should mail your payment 7-10 days before the due date to make sure they receive it on time.   The problem here is that if they mailed it to you, and it took 7-10 days, and you put your payment in the mail the next day, and that took 10 days, your payment would always be late!   Wasn’t that convenient for them?

To be sure, I always recommend that bills be paid online online using your bank’s online bill paying service, not your credit card company’s service.     This way you have direct control of your finances and confirmation that the payment was sent.    Most importantly, you are not leaving anything up to the whims  of the postal service.   As an extra bonus, you will save 44 cents per bill, per month.   If you pay 10 bills a month, you are saving over $50 a year in stamps alone.

If I pay my bills electronically, why do I care that they are increasing my time to pay  them?    There are several reasons.    First, even electronic payments sometimes take time.    Depending on the agreements that your bank has with your credit card company, you may have to schedule payment as much as four business days in advance, especially when you have just established a new payee account.   Secondly, I still don’t bother to check my statement online in most circumstances.  I just don’t have the time, patience, and discipline to figure out when all my statements close, and what my username and password is.   Furthermore, some credit card company websites are so unwieldy, that it may take three or four steps to get to the point where you need to download your statement.    I’ll take the envelope please.  That way I can initiate payment and file it in my records.    Finally, I do travel from time to time, and it is real scary on a week long trip wondering what bills might arrive the day after I leave, that I might have to pay immediately upon my return.   Give me another week, and it will never be a problem.

New APR Notification Goes From 15 to 45 Days

I think now we have the explanation for why so many people were getting letters in the mail notifying them of rate increases.    The credit card companies are obviously trying to sneak these in as a precautionary measure before they would have to give you triple the notice.     Look, I don’t pay interest on my credit cards, I am a classic deadbeat in that regard, but I still think this is only fair and reasonable.     45 days is enough time for anyone who has the ability to pay off a balance to do so.     For many, this will involve the redistribution of their assets, restructuring of their debt,  or the transferring of  a balance.    15 days just isn’t enough time to accomplish anything meaningful in advance of a rate increase.    The next step in the implementation will be forbidding the increase of rates on existing balances.

Where Do We Go From Here?

Frankly, these two provisions that are going into effect tomorrow were kind of a surprise to me, and I had been following the legislation very closely.    Unfortunately, the remaining provisions do not go into effect until February 22, another six months from now.     The Wikipedia entry for the CARD act details many of these provisions.

In the mean time, be careful what your read about the CARD act.   Banks were making all sorts of dire predictions of doom and gloom if the law was passed.    Reporters are now looking for the faintest signs of change in the credit card industry, and instantly placing blame on the CARD act.   You could make a doom and gloom argument against any major piece of consumer protection or safety legislation, and then immediately interpret anything bad as being the result of it.    If these doom and gloom scenarios perpetuated by pro business interests were true, all the bars and restaurants in New York City and California would be out of business after they prohibited smoking, the movie industry would have been killed off by the VCR, and Medicare would have lead to Communism.

Yes, APRs will go up, and the CARD act will be partly to blame.   Ultimately, this will create a much more fair, transparent, and avoidable way to pay for your credit card than the traditional fees brought on by tricks and traps.

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