New Law About Credit Cards Affects Millions

A new law about credit cards is making waves, affecting millions of people in the US. The law aims to protect consumers from unfair practices by credit card companies.

As of next year, credit card companies will no longer be able to charge interest on new purchases if the balance is paid in full each month. This means that millions of people will save money on interest charges.

The law also requires credit card companies to give consumers 21 days' notice before raising interest rates. This is a significant change, as previously companies could raise rates without warning.

Consumers will also be protected from surprise fees, such as those for late payments or exceeding credit limits.

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The new law about credit cards has brought about some significant changes to how credit card companies can operate. Credit card companies must now give consumers at least 21 days to pay their bills from the time the bill is mailed.

This is a big deal because it prevents companies from "trapping" consumers by setting payment deadlines on weekends or in the middle of the day. Payment deadlines can't be changed each month either.

Consumers also get some protection against rate increases. Credit card companies must give at least 45 days notice before raising rates, and can't change any terms of the contract within a year.

Here are some key provisions at a glance:

Credit card companies are now held to certain standards thanks to the Credit Cardholders' Bill of Rights. This law includes provisions that benefit consumers.

Credit card companies must give consumers at least 21 days to pay their bills from the time the bill is mailed. This means no more "trapping" consumers with payment deadlines on weekends or holidays.

Consumers are protected from retroactive rate increases. Credit card companies must give at least 45 days notice before raising rates, and can't change contract terms within a year.

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Low introductory rates must last at least six months. This gives consumers a chance to pay off their balance without getting hit with a rate hike.

Credit card companies must apply payments to the highest interest rate balances first, making it easier to pay down debt.

Statements must show consumers how long it would take to pay off their balance if they only make the minimum payment, and must show the payment amount and total interest cost to pay off the entire balance in 36 months.

The law also limits the first year annual fee for a credit card to 25% of the credit limit. This prevents credit card issuers from charging excessive fees.

Here are the key provisions at a glance:

Credit card rewards programs can be a great way to earn benefits, but beware of potential pitfalls. Consumers have reported difficulties redeeming rewards or having them devalued due to policy changes of partners.

The CFPB has issued a report highlighting unfair practices, including devaluing earned rewards, hiding conditions for earning or keeping rewards, and failing to deliver promised benefits. These practices can be considered unfair or deceptive acts or practices.

System failures that result in consumers losing points when attempting to redeem them may be considered an unfair or deceptive practice. This is not a hypothetical scenario, as the CFPB has recently settled a case against a financial institution regarding an allegedly failed system upgrade.

To help consumers navigate credit card rewards, the CFPB has launched Explore Credit Cards, an online tool that allows consumers to compare more than 500 credit cards using unbiased, comprehensive data.

The tool aims to enhance price competition in the market, giving smaller providers a chance to compete. However, it's already dated, with data as of June 2024, and only provides updates every six months.

Entities operating in the credit card rewards space should review the CFPB's circular to assess its applicability.

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Credit card issuers would have to curtail their offerings due to the red tape imposed by the CFPB's rules, resulting in fewer credit card options and benefits.

The CFPB's rule would likely cause a reduction in popular perks such as cashback rewards, discounts on groceries and gas, and travel perks with airline and hotel partners.

Americans are concerned that capping late fees could lead to a reduction in credit card benefits or an increase in other fees.

Fifty-seven percent of respondents said capping late fees would not be a good tradeoff if it caused credit card companies to increase other fees like annual fees, balance transfer fees, and cash advance fees.

Credit card users are well aware of late fees, as they are required to receive written disclosures about important terms of credit, including late fees, before opening an account.

Credit card issuers often provide disclosures and communications that are more extensive than required by law, and some even offer email, text, and push notifications to remind consumers of their payment due dates.

The new law about credit cards is expected to have significant effects on consumers. 99% of Americans believe it's essential to pay their credit card bills on time, yet the new rule may lead to more people making late payments.

A decrease in credit card late fees will likely result in more people making late payments, according to a poll. By a 21-point margin, respondents believe this will happen.

Credit card holders agree that late fees are necessary to cover risks and costs. 71% of credit card holders think late fees are essential for credit card companies to cover these expenses.

The new rule will mean higher costs for existing credit card users who pay their bills on time. This is a consequence of the rule changes.

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The new law about credit cards has some significant legislative details that you should know. The law requires credit card issuers to clearly disclose the terms and conditions of their credit cards, including interest rates and fees.

Credit card issuers are now prohibited from charging interest on new purchases if the balance is paid in full by the due date. This means you won't have to pay interest on your purchases if you pay your bill on time.

The law also limits the amount of time credit card issuers can take to process disputes. Credit card issuers can only take up to 45 days to investigate disputes, and you can't be charged interest on the disputed amount during this time.

Now, let's talk about the benefits of this new law. You'll have more control over your credit card spending and can avoid unnecessary interest charges.

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