The Credit CARD Act changes that go into effect on August 20, 2009 are small potatoes compared to the major changes that will take place in February of 2010. In fact, the Federal Reserve Board summarizes them in just three bullet points on their press release.
Of course, 107 pages of details accompany that press release. (I can’t wait to see what I get to wade through when the next round comes along.)
To their credit, the regulators have to consider all kinds of arcane but possible scenarios. And one of those scenarios jumped out at me as deserving mention. As background, recall that after August 20, 2009, you will get 45-days advance written notice of a major change in terms on your credit card account and you’ll have the chance to opt out of the new terms. (You may or may not be required to close your account.)
Here’s the scenario that caught my attention: Let’s say I get a notice that my credit card company is going to raise my fixed rate of 9.9 percent to a variable rate that works out to 17.99 percent. I can opt out and maybe my issuer will let me still keep the card. Realizing my rate is going to jump on new purchases after the change takes effect, I go on a shopping spree, locking in my current purchases at 9.9 percent.
The Fed says this isn’t exactly fair to issuers, so they are going to allow issuers to charge you the higher rate on any individual purchases you make 14 days or more after the notice of the change in terms is sent to you.
So here’s another scenario: I receive that notice, but it goes into my pile of mail to read, and I put off reading it. I continue to use my card, only to later discover that I have made those purchases at the new higher rate, even though it hasn’t really gone into effect yet.
So word to the wise – even after the 45 days notice goes into effect, you have to pay attention, immediately read notices that your card issuers send you, and act accordingly.
Gerri Detweiler – Personal finance author and Credit Advisor for Credit.com, Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author of Reduce Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis.
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Here’s another trick with this that Amex is using. They are sending out notices now that rates will go up in October, but do not specify the new rates. And they send out these notices right before the new requirements go into effect. Coincidence? Hardly.
I have 2 credit cards that i have had for over 10 years at very low rates. I received a letter from american express lowering my credit limit by more than half and received a notice from chase advising that my low 7.9 apr will change to over 13%! I know the laws were supposed to protect consumers but for me a person with an excellent credit history it has done nothing but lower my credit score and if I cancel the chase card it will lower it even more. It’s a horrible situation!!!