We said it a few months ago how the credit crisis could lower your credit score even if you have paid all your bills on time and in full. One problem we have seen happen too often in the last month was linked supposedly jacking rates. The definition of jacking rate is when a credit card company increases your interest rate on a 15-day notice, even if nothing in your credit history has changed.
approved the Federal Reserve Board today some dramatic changes rules that will help to minimize both practices. The bad news is the rule will not come into force before 1 July 2010. So you will not get the rate relief jacking soon! Congress can pass a law before that date will make some of these changes will come into effect sooner. But given the inability of Congress to pass the legislation reining in credit card issuers for years, we would not hold our breath -. Especially considering the size of donations from credit card companies make both parties
Meanwhile, the best way to reduce your interest rate is to obtain a new credit card with a transfer 0% APR balance and move your balances there. Read our reviews and comparisons of the best balance transfer credit cards. If you have good credit, you have options, even in this economy. You must not be rate-jacking victim.
Here are some key points of the new rules we have taken from the summary of the Fed
- Time to make payments . The final rule prohibits banks to process a payment
later purposes unless the bank provides a reasonable amount of time to
the consumer to make that payment. The rule provides a safe harbor for banks
sending periodic statements at least 21 days before the due date of payment. - Allowance payments. When the annual percentage rate (APR) apply to
different balances on a credit card account (eg, purchases, balance
transfers, cash advances), the final rule requires banks to allocate payments
exceeding the minimum payment to the balance with the highest rate first or pro
rata among all balances. - The increase in interest rates. The final rule requires banks to disclose the account
opened all interest rates that will be applied to the account and prohibits increases in
these rates, except in certain circumstances. First, if a rate disclosed in the account
opening expires after a fixed period of time, banks may apply an increase of
rate which was also communicated to the account opening. Second, banks can increase a
rate due to the use of an index (in other words, the rate is a variable rate).
Third, after the first year, banks may increase the rate of new transactions only
after following the 45-day notice requirement in Regulation Z.
Fourth, banks may increase a rate if the minimum payment is received over
30 days after the due date. - Increased notice for changes in terms. The final rule
increases the amount of notice before a term may be modified
imposed from 15 to 45 days to better enable consumers to obtain financing methods
or change the use of their account .
Overall, we certainly welcome these rule changes and they will clearly end or severely restrict the rate-jacking and other practices. Of course, it would be much more enjoyable for consumers if these changes came into force more quickly. Yes, credit card issuers need time to adjust, but in this economy consumers need relief sooner. The banks have received billions in federal aid in the space of a few months -. You might think consumers would not have to wait a year and a half using
Finally, although we think that the rules are fair and good overall, also keep in mind that they will make credit cards less profitable for banks. Banks will most likely in turn offer less favorable conditions and rewards programs for consumers. To what extent this will happen remains to be seen.