Beginning this month in August and future months going forward, the credit card accountability responsibility and disclosure act will go into effect and it phases in over roughly the next 13 months.  There are many different mandates, but I wanted to share 10 with you that I thought would be of significance as you plan your personal finances.

1.  Most immediately, statements have to be mailed 21 days before the bill is due.  That’s a big change from the old bill that had to be at least 14 days advanced mailing.  Even those of you who are on snail mail, this should give you more time in your hectic lives if you haven’t had a chance to look at the bill.  The moral of the story here is that you should be able to pay your bill on time.

2.  Issuers have to give 45 days notice before increasing interest rates and fees.  One of the things you want to make sure that you do is examine your bill every month and see whether or not there’s a notice on the bill that your interest rates will be rising.  The only way you can plan smart is to know what you’re actually paying on your overall credit card, and what your rates will be for future months.

3.  Beginning next year in February 2010, teaser rates must be in effect for at least six months, so nobody can give you a credit card to tease you for just a month just to get your credit card balance to move over and then take it away from you down the road a month later.

4.  Except for the expiring fees, the rate on new purchases can’t be hiked in the first year.  That’s extremely important, because some of the credit card companies used to have teaser rates for six months and then they would actually hike the rate.  Now you will have a fixed rate for new purchases for a year.

5.  Applicants who are under the age of 21, the college students that we must look out for, must have an adult co-sign or show proof of income approval.  The co-signing act is big because one of the downfalls of our 20′s generation today is that the credit cards they carried over from college into the work world has created large debts that are difficult to pay off.  Having a co-signer may be one more impediment not to take on several cards and credit card debt before you even finish college.

6.  Issuers can’t sign up if on or near college campuses.  Hey, I remember when I wanted to go on spring break to Florida or the Bahamas in college and just charge it like I actually had the money.  Well, we know that isn’t always the best financial move and the habits that you learn early stick with you for the rest of your life.

7.  Issuers can no longer practice the universal default rates  which really means raising your rates if they learn that you are late on another account. So by pulling your credit score, if they learn you’re consistently late they would normal automatically charge you a higher rate.  This is one of the ways the credit card companies were successful in the past.

8.  Issuers cannot raise rates on an existing balance unless a payment is more than 60 days late or a teaser rate expires.  The main point is that 60 days to pay your bill if you have been late historically is now more important than ever to watch as a deadline.

9.  When the credit cards company tacks on a late finance charge, issuers cannot average daily balances from the previous billing cycle.

10.  In roughly 12 months, cardholders who have been assessed the penalty for an APR for a late payment can reclaim the lower rate if they pay on time for six consecutive months. So, if the credit card company does give you higher rates, it’s not one of those deals where you’re stuck and they sort of got you by the short hairs.  You can actually get the rate back to where it was if in fact you pay on time for six months.

Ted Jenkin, CFP^®, AAMS^®, AWMA^®, CRPC^®, CMFC^®, CRPS^®

Co-CEO and Founder oXYGen Financial, Inc.

11680 Great Oaks Way, Suite 175 | Alpharetta, GA 30022
Phone 1.800.355.9318 or 770.777.0427

oXYGen Financial, Inc. co-CEO Ted Jenkin  is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.

TED JENKIN IS SECURITIES LICENSED THROUGH INVESTACORP, INC. A REGISTERED BROKER/DEALER MEMBER FINRA, SIPC.  ADVISORY SERVICES OFFERED THROUGH INVESTACORP ADVISORY SERVICES, INC. A SEC REGISTERED INVESTMENT ADVISORY FIRM.