September 1, 2010 Credit Card Rules to Help Consumers.
Three new regulations take effect on Wednesday, September 1, 2010 that will bolster changes made earlier this year.
First, card issuers will be required to offer borrowers a minimum 21-day grace period, during which they won’t have to pay interest on new credit card purchases as long as they pay off their balance by the due date. Previously, grace periods varied and interest could be charged from the date of purchase on new items if the card holder had not paid last month’s bill in full.
The new grace period, which Finance Minister Mr. Flaherty said banks resisted, would cost banks “tens of millions of dollars”. It means purchases made the month after a balance has been carried forward will not be charged interest. Consumers must pay in full by the end of the month to take advantage.
Second, when customers make payments above the minimum amount, they must now be applied to the balance with the highest interest rate first, or proportionally to all transactions. Previously, card issuers could apply payments made above the minimum amount however they saw fit.
Third, credit card statements will have greater transparency and will have to show how long it will take to pay off a balance if only the minimum payments are made. They will also have to provide advance notice of any increases to fixed interest rates.
“People think paying the minimum amount is OK. That’s not OK,” Mr. Flaherty said. “It’s decades … It’s compound interest.”
These regulations follow several changes made in January, which included requirements for information disclosure boxes on statements, the need to obtain customer consent for credit limit increases, an end to over-the-limit fees caused by retailer holds.
