Credit Advances

It seems Uncle Sam has learned a thing or two from the credit crisis. Spurred by pleas from thousands of Americans, the federal government just adopted a set of reforms designed to make the credit card industry more consumer friendly. Included are longer payment notifications and limits on the ability to raise interest rates (it’s about time!).

But here’s the downside. Changes won’t go into effect for a year and a half. That could be the course of the recession (if we’re lucky enough for it to be that short)—the time when you need the most protection from greedy bankers. So if you need help now, it looks like you’re going to take matters into your own hands (we’ll be here for you, though—read on for advice on cutting your ties with credit).

But in the meantime, just what can you expect in July 2010?

I’m most excited about the limit on interest hikes. With consumers holding about $850 billion in credit card debt, this one is a biggie. Currently, banks can increase rates at any time. So if you carry most of your debt on a low-rate card (say, 8 percent), there’s nothing to stop your creditor from suddenly deciding to charge 30 percent—which could be totally devastating to your income (not to mention your credit). But no more, thanks to the government. Banks will only be able to raise rates on new cards and future purchases—not existing debt.

New rules also protect against unfairly shrinking payment periods. Have you ever had a bill arrive while you were on vacation, and then gotten slapped with a late fee even though you mailed it immediately after getting home? Just last month I left a bill on the coffee table for a few days before opening it, and had to pay extra to have it sent overnight. Turns out I had received it just a week before it was due. But starting in 2010, Uncle Sam is mandating a 21-day payment period—and even longer when due dates fall on weekends. Regulations also end double-cycle billing, in which consumers are billed for retroactive interest if they miss a payment.

Additionally, credit card statements and terms are required to be more transparent and companies are expected to give consumers 45 days notice before making any changes to accounts, including higher late fees. In all, the changes could mean $10 billion in lost revenue for credit card companies (gee, don’t you feel sorry for them?).

Of course, the new rules could also potentially make it harder to get a card if you have bad credit. But if that worries you, maybe you should ask yourself why you want to open another card when you already have trouble paying off the ones you have. Why sink further into debt when you can use this opportunity to start freeing yourself from it?

It’s never too late to wean yourself off credit cards and the lifestyle that comes with them—spending more than you earn, stressing to make payments while watching your debt grow to monstrous proportions, etc.

Visit our video center to learn to “Get Off The Credit Card Merry-Go-Round” (and check out our other videos on issues like bankruptcy and foreclosure while you’re there). While you’re at it, consider a free one-on-one debt analysis with one of our attorneys.

Why wait 18 months for a credit break when you can break free from debt today?

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