Yesterday my wife and I got mail from one of our credit card companies. Not that it matters too much for us because we pay our credit card balance every month, but it was still interesting.
The government recently set new restrictions on credit card companies. These restrictions were supposedly put in place to help the consumer with credit card balances. After reading over the changes to the policy there are some policy changes that are definitely designed to help the consumer, but there is also some bad news for those with credit card debt. I don’t have the letter in front of me so I’ll just talk about the things I remember from the notice.
First, the monthly minimum payment will increase this will help pay off the credit card debt quicker and may deter additional spending. Many consumers may view this is something bad because they can barley make their current minimum payments.
Second, the credit card company will no longer increase your interest rate on existing balances because you pay late or skip a payment. They can however increase your rate for future purchases and you know they will do this. Again this may help denture additional unnecessary monthly spending.
Third, additional payment you send over the minimum payment will be applied to the highest interest rate debt. This is a great plus for the consumer and I must admit I’ve been caught by this trick in the past. Credit card companies sometimes offer low or no interest balance transfers. If you take advantage of this offer any additional spending will be charged your normal interest rate and it’s usually in the double digits. When you send payment to the credit card company this money is used to pay the lowest interest rate loan first. This means until you pay off all the 0% balance transfer you will continue to accumulate a high rate interest on any additional spending. I’m sure so many people have complained about this that the government finally took action.
Finally, late fees and the current interest rate both increased. I guess since many of the features were designed to help the consumer save money they had to add this one to counteract the savings. I guess the credit card companies have to make money too.