Creditcard Holders' Bill of Rights of 2009

With President Obama expected to sign it into law this week, I thought I would take a look at the new bill and what it might mean to students in particular.

The gist of the bill is as follows:

Fees Credit card issuers will no longer be able to charge fees for mail, phone, online or electronic transfer payments. The nebulous thing here is the "except to expedite payment" phrase. I'm guessing they will just put a 48 hour process time on electronic and phone payments to charge people to expedite the payment when they go to pay on the due date. Paypal/GE Money do this already by putting a two day delay on web payments, so people who wait until the due date, or even the day before, are forced to either pay the large late fee or make a phone payment for $15, which is half of the late fee.

Overlimit fees will also be banned, unless the consumer signs up for the service, meaning you can allow your card to be charged beyond the limit in an emergency and they company will apply an over the limit fee. Otherwise, credit will not be extended once cent beyond the limit. Currently many credit card companies will authorize a charge that exceeds the limit by a few dollars and then charge an over the limit fee.

Rates may not be changed on existing accounts unless the account is 60 days past due. I've heard on several radio stations but can't yet confirm that they will have to give consumers a chance to reclaim their original rates by making six months of payments on time.

Payments over the minimum amount due must be applied to the highest interest rate first. It's about time. Currently, if you have a 0% balance transfer and a 14% cash advance and a 11% purchase rate, any amount paid beyond interest goes to the lowest balance first. Now you can actually take advantage of the low or no interest balance transfers and pay off higher interest balances.

For consumers under 21, the credit card issuers must either get the signature of someone over 21 to guarantee the loan or the applicant must prove they are capable of repaying the debt. There is a limit on the amount of credit that can be provided to 20% of their yearly income, so a student making $5,000 a year could only get credit in the amount of $1,000 a year.

My Take

This is a mixed bag, with definitely some good provisions in it. But since the bill wont take affect for several more (maybe twelve) months, expect credit card companies to begin raising rates on existing balances until the law begins.

For students I think it hits the mark. I filled out several applications where I stated my household income as larger than it was. This is a common practice, since the incomes were rarely verified and technically if you included my parents my household income did look like that.

Some students are bitter about this portion, and I am sure some students handle debt well. But many more do not, and this law isn't really aimed at them anyway, but at the unscrupulous tactics the credit card companies use to lure them in.

I'll have more on this as I get my hands around it, so look for another post soon.