You carry a balance everyday and the balance might be different on some days. Variable rates
can increase when based on an index that increases (for example, if you have a
variable rate that is prime plus two percent, and the prime rate increase one percent,
then your APR will increase with it). The operative term is "up to" because the
credit card company will issue you a credit limit based on your credit rating and
income and often issues much lower credit limits than the "up to" amount. So, as
long as you pay on time and don't open an account in which the credit
card company discloses every possible interest rate to give itself permission to charge whatever APR
it wants, you should benefit from this new rule. Late
PaymentsSome credit card companies went to extraordinary lengths to cause cardholder payments to be late.
Allocation of PaymentsDid you know that your credit card account
likely has more than one interest rate? Your statement only shows one balance, but the
credit card companies divide your balance into different types of charges, such as balance transfers,
purchases and cash advances.Here's an example: They lure you with a zero or low percent
balance transfer for several months. So, you'll need to keep your eyes open for an
increase in tricks designed to plummet you into more debt and make a habit of
insisting that these companies abide by the new rules of the game once they kick
into action in 2010. These new rules go into effect in 2010 and could provide
relief to many debt-burdened consumers. After receiving over 60,000 comments, federal banking regulators passed new
rules late last year to curb harmful credit card industry practices. It may also reduce
the amount of time it takes to pay off balances.This rule will only affect cardholders
who pay more than the minimum monthly payment. and good riddance!5. However, if you adopt
a policy of always paying more than the minimum, then this new rule will directly
benefit you. This is two-cycle (or double-cycle) billing.The new rule expressly prohibits credit card companies
from reaching back into previous billing cycles to calculate interest charges. Furthermore, these rules do
not go into effect until 2010, so be on the lookout for an increase in
late-payment-inducing tricks during 2009.2. Alternatively, some people trying to get out of debt can negotiate
their own debt-reduction settlements with the help of do-it-yourself debt settlement kits. If you only
make the minimum monthly payment, then you will still likely end up taking years, possibly
decades, to pay off your balances. The amount of interest the credit card company charges
is not based on the ending balance for the month, but the average of every
day's ending balance.So, if you charge $5000 at the first of the month and pay
off $4999 on the 15th, the company takes your daily balances and divides them by
the number of Nike Tn days in that month and then multiplies it by the applicable APR.
Some credit card companies are already lowering credit limits and increasing the minimum monthly payment
amount from around two percent of the outstanding balance to as much as five percent.
So, some cardholders may see their payments double and this could cause a lot of
problems for cash-strapped consumers. High Fees on Low Limit AccountsYou
may have seen the credit card advertisements claiming that you can open an account with
a credit limit of "up to" $5000. So, credit card companies have one year to
wreck havoc on consumers (not that they haven't been doing so over the past 30
years). Two-Cycle BillingInterest rate charges are based on the average
daily balance on the account for the billing period (one month). If you fall into
this category, then you will want to pay close attention to the postmarked date on
your credit card statements to make sure they were sent at least 21 days before
the due date. You should also pay close attention to notices from your credit card
company and keep in mind that this new rule does not take effect until 2010,
giving the credit card industry all of 2009 to hike interest rates for whatever reasons
they can dream up.4. Some companies mailed statements out to their cardholders just days before
the payment due date so cardholders wouldn't have enough time to mail in a payment.
This reduces the amount of interest charges cardholders pay by reducing higher-interest portions sooner. You
would think that you should owe nothing on the next month's bill, right? Wrong. Now,
imagine that you paid off that extra $1 on the first of the following month.
Credit card companies can increase an account's interest rate when the cardholder is "more than
30 days delinquent."This new rule impacts cardholders who make payments on time because, from what
the rule says, if a cardholder is more than 30 days late in paying, all
bets are off. So, that new pair of shoes you bought at 9.99 percent APR
is now costing you 29.99 percent.The new rules require credit card companies "to disclose at
account opening the rates that will apply to the account" and prohibit increases unless "expressly
permitted." Credit card companies can increase interest rates for new transactions as long as they
provide 45 days advanced notice of the new rate. Period. You'd get a bill for
$175.04 because the credit card company charges interest on your daily average balance for 60
days, not 30 days. So, when you send in your payment, they apply all of
your payment to the zero or low percent portion of your balance and let the
higher interest portion sit there untouched, racking up interest charges until all of the balance
transfer portion of the balance is paid off (and this could take a long time
because balance transfers are typically larger Zapatillas Puma than purchases because they consist of multiple, previous purchases).
Bankruptcy is often an obvious option for people financially pinned against the wall, but the
2005 bankruptcy law revision made it more difficult for many consumers. So, all the cardholder
was getting was just a little more credit than he or she needed to pay
for opening the account (is your head spinning yet?) and sometimes ended up charging a
purchase (not knowing about the large setup fee already charged to the account) that triggered
over-limit penalties -- causing the cardholder to incur more debt than justified.The new rules place
restrictions on how much credit card companies can charge for these account setup or membership
fees and requires that they spread out these fees over at least a six-month period
if these fees consume more than 25 percent of the account's credit limit.What now?It's 2009
and these rules don't take effect until 2010. The practice gets more interesting when Bank
A gives itself the right, through contractual disclosures, to increase your APR for any event
impacting your credit worthiness. Of course, paying more than the minimum is always a good
idea, so don't wait until 2010 to start.3. Of course, you should still strive to
make your payments on time, but you should also insist that credit card companies consider
on-time payments as being on time. However, there are three universal points to live by
to get the most out of these new rules: always read your cardholder agreement and
notices, always pay on time and always pay more (much more) than the minimum monthly
payment.Time to Get Out of DebtThese new rules may also have other side effects. It
is essentially reaching back into the past to drum-up more interest charges (the only industry
that can legally travel time, at least until 2010). Gone... Debt settlement is growing in
popularity because it provides financial relief through negotiated reduction in the amount owed, but people
looking to enroll with a debt settlement company should make sure they are dealing with
a well-established, reputable company. Universal default is when Bank A raises your credit card account's
APR when you are late paying Bank B, even if you're not or have never
been late paying Bank A. Consumer credit counseling is another option that's popular, but it
involves more organizational relief than financial relief. But what happens when the credit limit is
a lot lower -- I mean A LOT lower -- than the advertised "up to"
amount?College students and subprime consumers (those with low credit scores) often found that the "up
to" account they applied for came back with credit limits in the low hundreds, not
thousands. So, if your credit score lowers by one point, say "Goodbye" to your low,
introductory APR. To make matters worse, this APR increase will be applied to your entire
balance, not just on new purchases. However, purchases are assessed an 18 percent APR, so
that portion of your balance is costing you the most -- and the credit card
companies know it and are counting on it. For example, some companies set the date
to August 5, but also set the cutoff time to 1:00 pm so that if
they received the payment on August 5 at 1:05 pm, they could consider the payment
late. Essentially, the credit card companies were rigging their payment system to maximize its profits
-- all at the expense of your financial wellbeing.The new rules state that the amount
paid above the minimum monthly payment must be distributed across the different portions of the
balance, not just to the lowest interest portion. This just means that there is no
better time than now to start getting yourself out of debt and out from under
the thumbs of the credit card banks.There are a few ways to get out of
debt. In this case, your daily average balance would be $2,333.87 and your finance charge
on a 15% APR account would be $350.08. To make things worse, the credit card
company charged an account opening fee that swallowed up a large portion of the issued
credit limit on the account. People saw their interest rates go from a reasonable 9.99
percent to as high as 39.99 percent overnight just because of these and similar tricks
of the credit card trade.The new rules state that credit card companies cannot consider a
payment late for any reason "unless consumers have been provided a reasonable amount of time
to make the payment." They also state that credit companies can comply with this requirement
by "adopting reasonable procedures designed to ensure that periodic statements are mailed or delivered at
least 21 days before the payment due date." However, credit card companies cannot set cutoff
times earlier than 5 pm and if creditors set due dates that coincide with dates
on which the US Postal Service does not deliver mail, the creditor must accept the
payment as on-time if they receive it on the following business day.This rule mostly impacts
cardholders who often pay their bill on the due date instead of a little early.
Universal DefaultUniversal default is one of the most controversial practices
of the credit card industry. Here are those practices, how the new regulations address them
and what you need to know about these new rules.1. After you get comfortable with
your card, you charge a purchase or two and make all your payments on time.
As soon as one of these tactics worked, the credit card company would slap the
cardholder with a $35 late fee and hike their APR to the default interest rate.
Do-it-yourself debt settlement kits are available online and are less expensive than a professional,
third-party debt settlement program.John Janney is the president of the National Financial Awareness Network, a
personal finance publishing company and author of "How To Get Great Credit!" NFAN offers educational
products and services such as the popular Do-It-Yourself Debt Settlement Kit at http://www.diydebtsettlementkit.com/ and http://www.HelpForDebtors.com/..
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