New Credit Card Law Beginning on February 22nd 2010

Today there are a new credit card law implemented that were created to better protect the consumer. It is estimated that 181 million Americans will be credit card holders on 2010 and the average amount of credit card debt for households with a balance is approximately $11,000. Most people would not have any idea how long it would take to pay off their credit card debt by making minimum payments. Monthly statements have been simplified to list pertinent information in plain sight including how long it takes to pay off the debt.

Credit cards often carry a lot of different interest rates depending on your use of the card (cash advance, purchases, balance transfer and intro rate offers). Until now the industry practice was to apply your payments towards the lowest interest balances first. The new credit card law means that all payments above the minimum monthly payment must now be applied towards the highest interest balances first.

Interest rates on credit cards have gone up considerably in the last 12-18 months, but under the new rules card issuers would only be allowed rate hikes under limited conditions such as a variable rate or the cardholder makes a late payment.

Card issuers have a practice of raising interest rates on consumers that default on unrelated bills. This is called universal default and is not allowed on existing balances anymore, however future balances can still be subject to universal default rates provided a 45 days advance notice is given.

It is now more difficult for a student to obtain a credit card. Anyone under 21 will only be able to get a credit card if they have adult co-signers or show proof of enough income to repay the debt. This is a drastic change for the credit card companies that used to show up on college campuses and entice students with free gifts if they signed up for a credit card where approval was almost guaranteed.