Sign in
Become a MarketWatch member today
Jennifer Openshaw
Jan. 7, 2010, 12:01 a.m. EST · Recommend (3) · Post:
View all Jennifer Openshaw "º
"¹ Previous Column
Tips for making the most of gift cards
First Take "º
Holiday sales spurt can't stand alone
By Jennifer Openshaw
NEW YORK (MarketWatch) -- I don't expect much good news when I open mail from my credit-card company, but recently I received a notice that bore good tidings related to fees, grace periods and other policies. I nearly took a double take. Santa is delivering financial gifts!
In reality, it's all part of the new Credit Card Act going into effect right now.
These are policies you'll want to know. They're not a panacea for all of your financial aches and pains, but they do address many of the criticisms consumers have had about credit cards and the some $15 billion in penalty fees charged each year. And since your issuer may use any notice as an opportunity to notify you of other policy changes, it's wise to look closely at what's in the envelope.
Chicago's Second City is known as a training ground for comedic actors, but it also offers improv classes to Corporate America. Lesson No. 1: Learning how to listen, a necessary skill in improvisation -- and business. MarketWatch's Amy Hoak reports.
Most of these new rules go into effect next month if they haven't already, so take a look at what you can expect and what you still need to do to protect yourself.
Over the years, many of you have asked me how credit-card issuers can just boost your interest rate. In the past, your rate could change with a 15-day notice in most cases. Now, under the new law, you're entitled to a 45-day notice of any rate change. This means you still need to pay attention to your statements because the notice will accompany your bill and you may want to re-think which credit cards are at the top of your wallet.
Starting in February, your rate on existing balances can only be raised if you are more than 60 days late on your payment. This means the credit-card issuers have reason to change your agreement and increase your rate on all existing and future purchases. But if you're a good borrower over the next six months -- meaning you make at least the minimum payment on time -- your existing balances can return to the original, lower rate.
This one killed a lot of people. You'd send in a payment for more than the minimum due and the extra amount -- assuming you had two balances at different interest rates -- would go to the card with the lowest rate, such that you'd ultimately be paying more in interest costs (the balance with the higher rate would exist longer). The new law puts an end to that. It says that if you have two balances, one at 3.99% and another at 16.99%, for instance, and you make a $150 payment when the minimum due is only $100, the additional $50 will go toward the higher-rate balance.
In the good old days, consumers had 30 days from which to make their next payment. Over time, that 30-day grace period dwindled to 25 or fewer days. That was painful for many consumers. The new law says you will have at least a 21-day grace period from the date your bill is delivered. But check your issuer's policies because they may have granted a longer period to deal with operational issues on their end. Interestingly, Linda Sherry from Consumer Action points out that "the way this was written, there doesn't have to be a grace period. This is 'if there's a grace period and, if so, it must extend for at least 21 days after the statement is delivered.'"
Remember, you want to do everything possible to have your payment credited immediately to your account. Any delay means you're susceptible to more fees. The good news is that the law now requires that your due date be the same date every month and that if your payment is delivered on a non-business day, like the weekend, it cannot be considered late. Still, here are the three things you want to keep in mind to get your payment credited immediately:
Have your payment received by 5 p.m. local time on the due date (versus 5 p.m. EST-- this is another improvement thanks to the new rules).
Pay with a check or money order.
Send it in the return envelope with the remittance portion of your statement.
Remember, many issuers will use the new rules as an opportunity to make other policy changes, some even good. Bank of America, for instance, points out that cardholders won't be penalized with both a rate increase and a late fee if the payment is only a few days late (remember rushing to mail it just a day or two before the due date?). They'll allow a few days but if you're late beyond that, you will be assessed a late fee. "This is a sort of leniency period," says Sherry, of Consumer Action. They've also set their grace period at 25 days, longer than the 21-day legal requirement.
So, yes, this is all good news. One study by Morrison & Foerster says this will save consumers some $10 billion in penalties. I hope so. Santa and his elves have been working hard in Washington. But since Santa can't work financial miracles, you still need to be a good borrower and keep on top of policy changes.
Jennifer Openshaw, a nationally recognized entrepreneur and financial commentator, is author of " The Millionaire Zone ." Through SuperFutures.org she offers a youth leadership program at the United Nations to help teens develop skills for success in college, work and life. You can find her on Facebook, Twitter @jopenshaw or email at jennifer@familyfn.com .
- dragonslayer4440 | 12:19 a.m. Today12:19 a.m. Jan. 7, 2010
Sustaining a recovery requires jobs.
24 min ago2:15 p.m. Jan. 7, 2010 | Comments: 1
On Personal Finance
For once, good news about your credit card
Editor's View
As new gadgets fly, tech stocks can't keep up
On the Markets
The last shall be first
Tech Tales
Apple steals thunder away from CES hoopla
This Week in Japan
JAL's fate is clear, but details still cloudy
Minyan Market Musings
Ten themes for 2010
Media Web
Read Full Article »