Daily Dupaco

Wednesday, June 10, 2009

Tips For Seeking The Best Credit Cards As New Rules Finalized

A new credit card reform law passed this month has some consumers wondering if they're carrying the best credit card in their wallet.

New protections for consumers from abusive credit card practices became law after President Barack Obama on May 22 signed H.R. 627, the Credit Card Accountability, Responsibility and Disclosure Act of 2009.

The bill will prevent lenders from such things as making arbitrary changes to the interest rates and terms associated with a card that holds an existing balance.

Matt Dodds, Dupaco Community Credit Union Senior Vice President of Consumer Lending, offers some consumer insights on the new law's provisions, which generally are effective in nine months.

Provisions of the new U.S. credit card law would, in part:
  • Prohibit retroactive interest rate hikes on existing balances;
  • Prohibit double-cycle billing (charging interest twice for balances paid on time);
  • Prohibit due-date gimmicks;
  • Require 45-days' advance notice of interest rate, fees, and finance charges hikes;
  • Require payments to be applied fairly to the highest interest rate balance first;
  • Require bills to be mailed 21 days before they are due; and
  • Strengthen credit card protections for young people.
As with any new law, financial institutions must wait for the Federal Regulatory Agencies to interpret and issue final rules and regulations, says Dodds.

In the meantime, to ensure they are carrying the best credit card in their wallet, Dodds advises consumers to:
  • Review monthly credit card statements, check the interest rate and fees. Look carefully at the small print;
  • Understand how they plan to use the card before selecting one. For example, consumers who sometimes carry over a balance from month to month may be more interested in a card that carries a lower interest rate. If consumers expect to always pay your monthly bill in full--and other features such as frequent flyer miles are not important--the best choice may be a card that has no annual fee and offers a longer grace period.
  • Know and understand how credit history impacts how much credit card users will pay in interest. Good to excellent credit will result in better credit card deals.
"Congress passed this legislation to protect consumers from abusive credit card practices," according to Dupaco's Dodds. "Many financial institutions, including credit unions, generally don't engage in most of practices eliminated by the new law."

Dodds anticipates no immediate changes to Dupaco's credit card program, but says the credit union continues to review the rules. He says some portions of the new law could "have the unintended consequence of raising compliance costs and making credit more expensive and less available to consumers."

"The bottom line is that as a not-for-profit member owned financial cooperative, Dupaco is committed to providing our members the most cost-effective credit card program possible," he says.

"There may not be fancy gimmicks, but when you do business at the credit union, you know what you are going to get," says Dodds.

For more information, check these federal government websites:

Choosing A Credit Card: The Deal is in the Disclosures (Federal Trade Commission) http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre05.shtm

Choosing a Credit Card (Federal Reserve Board) http://www.federalreserve.gov/pubs/shop

File a complaint about abusive financial service practices (Federal Reserve Board) http://federalreserveconsumerhelp.gov
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