New credit card laws went into effect in late February, and if you aren't aware of what the changes are or what they mean, then it's time to sit down and find out. For nearly a year now, credit card companies have been planning ahead for today by raising fees and interest rates to compensate for what will likely be a significant drop in profit-as much as $5 billion this year alone.
What the credit card changes are
Four major changes are now in effect with credit cards:
- Credit card companies are now required to tell you how long it will take you to pay off your balance.
- Your credit card company is required to tell you in advance before raising fees or interest rates.
- Your rate cannot be raised retroactively unless you are two months behind on your balance.
- Students under age 21 will not be able to get a credit card without an adult to co-sign.
One important thing to note: Credit card companies will be able to raise annual fees and collect fees on dormant cards.
How the credit card changes impact you and your family
You might change your spending habits after getting a stark look at how long it will take to pay off the balance. With higher interest rates on most cards these days, a purchase of several thousand dollars could take up to 10 years to pay off! It will force families to reconsider purchases and rethink payment options, such as paying cash, saving up beforehand, or setting aside a set amount each month to ensure that more than just the interest is paid on each billing cycle.
Good news for parents: freshman in college won't be trapped in credit card debt that they are unequipped to deal with, thanks to the co-sign aspect for those under 21. Credit card debt has long been an issue among college students, who were able to sign up easily and rack up an enormous amount of debt that hurt their credit in the long run.
Are you changing your spending habits because of the credit card law changes? Tell us how!
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