The Fed is Getting Tougher on Credit Card Companies


In a press release earlier this week, the Fed announced they have approved the final rule amending Reg Z regarding credit cards which will go into effect on February 22, 2010.   The new rules set tougher guidelines on credit cards, especially with regards to protecting consumers against rate changes and how they are billed.  

No interest rate increases for the first twelve months.  There are some exceptions such as if you have a variable rate tied to an index; if your rate is an introductory rate (which in that case, your rate must be fixed for a minimum of 6 months); and if you're more than 60 days late on your bill.

Increases to your interest rate can only be applied to your new balance.  Your old balance will keep the lower rate.

Payments will be applied towards the highest interest rates first when you pay more than the minimum payment.  (Some exceptions may apply).

Statements must be mailed or delivered at least 21 days before your payment is due.  Your due date should always be the same day of the month unless it falls on a weekend, in which case your due date will be the following business day.

Charges you make "over the limit" may be restricted (not allowed) unless you give your credit card company permission.

If you're under 21, you may need a cosigner such as a parent, to obtain a credit card.  Guess those credit card companies will have to stop preying on college students unless Mom or Dad agree to cosign.

No two-cycle (double-cycle) billing.  According to the FOMC's site "credit card companies can only impose interest charges on balances in the current billing cycle.

When your rate or fees are going to change, you must be notified 45 days priorto the change taking place.  You will have the option to refuse the change, however this probably means that your canceling your account.  If you do refuse the change, and your account is canceled, the creditor can impose higher payments by requiring to pay off your account in five years.  NOTE: Canceling your account may be damaging to your credit scores.  Should you get a notice that your rate or terms are changing and you don't agree with it, you are probably better off (as far as your credit score is concerned) paying off the card by applying more principal than canceling it with the creditor.

New monthly statements will show you how long it will take you to pay off your credit card making minimum monthly payments as well as what your monthly payment would need to be if you wanted to pay off your card in three years.

I applaud the new credit card rules.  Since their not going into effect until February 22, 2010 you may want to keep an eye on your interest rates…with just over a month before they take place, sly credit card companies may try to sneak a few changes in before things get tougher. 


  1. Rhonda,

    I also applaud the changes but I also believe it’s a calculated compromise between politicians and the big banks. It’s great that credit card companies cannot jack up rates, but I’m sure they’ll do everything they can to do it now before this goes into affect.

    The credit card companies also do not wish to extend too much credit due to consumers ability to pay back. If they can raise the rates now, they’ll still make a good profit.

    Did you know that by Federal law that credit card companies can only positively improve a consumers credit card terms two times in five years? It’s true. I just talked to somebody who was offered to skip a payment and be on 0% for 12 months. It was great for that 13 months but since they skipped a payment and had a lowered payment for 12 months,the credit card company cannot even lower his interest rate a little for at least 5 years. They never offered anything long term, and now they’re back to charging the ridiculously high rate.

  2. Keane, I totally agree: “it’s a calculated compromise between politicians and the big banks” …we just have to follow the money.

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