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May 21, 2009

Credit Card law

I posted about the credit card bill passed by the Senate a few days ago. The underlying theme of my post was that this law was not good enough. Well, I don't know if I just read it wrong or if the House changed it, but the version passed by the House was much better than what I posted about.

The bill as passed by the House would generally bar interest rate increases on existing balances unless a cardholder has failed to make even a minimum payment for 60 days. It would outlaw double-cycle billing, require 45 days' notice before any interest rate increase and prohibit increases any time in the first year after an account is activated. The legislation would also require card companies to apply a consumer's monthly payment to the debt with the highest interest rate, or to all debts equally.

This obviously alleviates a lot of my fears. First and foremost, it bars interest rate increases on existing balances unless the consumer fails to make a minimum payment for at least 60 days. Of course, knowing the credit card industry, our minimum payments will now go way up.

I also like the provision about applying the payments to the balances with the higher interest rates. I have a credit card right now that offered me this great 0% rate for any balance I transferred to the card. I usually paid this particular credit card off every month. However, apparently before I transferred the balance but after I had paid the card off from the previous month, several transactions posted. So there was a balance on the card before I transferred the balance that the 0% rate applied to. Because this particular card applies payments to the balance subject to the lower interest rate first, my payments ever since the transfer have applied to the balance with the 0% rate, leaving the other balance accumulating finance charges every month. Luckily, its not much, but if this had occurred after the new law that was just passed by Congress, that balance would have been paid first and I would actually get the full benefit of the 0% rate.

President Obama has not signed the bill into law yet, but it shouldn't take him long. Thank you, President Obama, for once again helping to level the playing field for us consumers.

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