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Credit Relief Act

by Ryan Yates

After months of allowing the credit card companies to find ways around the Credit Relief Act of 2009, it is now official. The Treasury has taken a long time to iron out the plan, but they insist the consumer will finally get relief from the credit card companies. Let’s take a look at some of the major changes and see how we are going to benefit.

The Changes

The credit card companies will no longer be able to retroactively hike the interest rates: These companies have used the past 9 months to change their interest rates from “Fixed” to “Variable.” The interest will continue to fluctuate as the variable index fluctuates. The end result is a slight improvement for the consumer, and a slight improvement for the credit card company since market changes will be absorbed in the “variable rate.”

Billing dates will occur the same day each month: No more midday cutoffs or due dates on weekends or holidays. This is a win for the consumer. Previously the companies moved the payment dates around the calendar by a few days. Allowing the companies to charge late fees for customers who have missed the payment due date.

Double billing cycle has been eliminated: Companies will no longer be able to use the previous months balance in the daily finance charge calculation. If you had a company that used this method, you should see a reduction in finance charges as you pay off the debt.

45 day notice for any changes to the account are now required: An opt-out clause must also be included. Beware that after the first year the account is open, the card company can change the interest rate for any reason. The card company can also lower the credit limit and/or close the account without your input. At least the consumer must be notified of these changes. I call that a so-so win, the card companies still hold onto a lot of power in this case.

Each statement will include the date at which the account will be paid off by paying the minimum payment: This is my favorite part of the bill. Now people might really look at how much debt they are in. The payoff date will be included in every statement. People will finally be able to notice that by paying the minimum payment on a $3,000 balance can take them up to 10 years to pay off. If I have one wish, it’s that people will be shocked. I’m sure the average American has NO clue that it will take the better part of their life to become debt free by choosing to pay minimum payments.

Each statement will include a phone number for a credit counseling agency: this will help the consumer from having to locate one. Judging by all the counseling agencies out there, I think one listed on the statement will make it much simpler for people to get help.

I’m happy the government was able to pass this bill. I also hope that people will begin to understand that living paycheck to paycheck is not a plan for success. That said, the credit card companies will continue to do well. I believe we will see a large increase in fees. The annual credit card fee and a fee for an idle account will come racing in first. Get ready because these guys know how to make money, and they will exploit anyway possible to do it.

{ 11 comments… read them below or add one }

Mrs. Money February 23, 2010 at

I noticed my last credit card statement was totally different. It’s weird to see changes take place like this. I am not sure how I feel about them yet. I think some of them are great though!

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Jeffrey Kosola February 23, 2010 at

Yes, I think it will be a little weird to see some of the changes. I’m glad the government is starting to help out. I still think that personal accountability must be taken from everyone in debt. People with high debt loads have done it to themselves (myself included). I’m glad that we only have one credit card with a balance, that will make it simply to watch.

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Beckey76 February 23, 2010 at

I like the new statements and cannot wait until I see it on all of our statements. Some have already implemented them, while others of course waited until the last minute.
.-= Beckey76´s last blog ..January 2010 update =-.

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Jeffrey Kosola February 23, 2010 at

I haven’t seen a new statement yet. I’m looking forward to what it says. I really want to see what the debt payoff date they come with is. Not that I’m worried about that debt will be finish soon, I’m just curious by nature.

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Ronnie February 23, 2010 at

Regarding telling how long it would take to pay off the card with the minimum, don’t they also have to tell you how long it would take to pay off the card in 3 years? I read that somewhere yesterday but I can’t find the blog, pfooey. One of my cards has implemented the new regulations, showing that if I paid the minimum balance it would take 14 years to pay off, but that if I paid $71/month, it’d be paid off in 3 years. The kicker? My minimum payment was $49! Pay an extra $22/month that you’d otherwise blow on you knows what, and save 11 years of your life. Now, that said, that card will be paid off by April, but it’s nice to see those numbers in real life.

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Beckey76 February 23, 2010 at

It does list the 3 year one too. The one I’ve seen so far said going from $44 – $84 that it will cut my length from 19 years to 3 years…I hope many people start paying more than the minimum. Even just $10 more a month will cut that down incredibly.
.-= Beckey76´s last blog ..January 2010 update =-.

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Jeffrey Kosola February 23, 2010 at

@Ronnie and @Beckey76 VERY good points and that is some great news. I forgot to include the 3 year payoff amount in the post. Thanks for noticing and making it a point to comment on it. I’m sure a lot of people will start to pay the extra. I’m also sure that there are quite a few out there who will not make the sacrifices to pay the extra and continue to be in debt forever.

Great job, I’m glad you two are on top of it.

Jeff

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Stay at Home Mom CFO February 24, 2010 at

I think this will be the most positive change for most people too. I couldn’t believe my eyes either. In my case it was $22 dollar difference between taking 3 years and 13 YEARS! Yikes! When I showed my husband, he suddenly became MUCH more supportive of all my debt reduction efforts.
.-= Stay at Home Mom CFO´s last blog ..Where is the Personal Finance Blogger who FAILS? =-.

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Jeffrey Kosola February 24, 2010 at

A $22 difference is so easy to pay that you won’t even notice. Just think if you tripled it to $66 extra, you’d be out even quicker. I’m glad your man is being more supportive. Make sure to tell him that he needs to get on board even more. The debt reduction efforts are not yours alone. Without my wife’s help we would not be making much progress. Good luck
Jeff

Forest February 24, 2010 at

Sounds like a mostly positive change to me. I like the time of payoff bit too and also the counseling number….

Thanks Jeff,
Forest.
http://frugalzeitgeist.com
.-= Forest´s last blog ..Save Money On Printing =-.

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Isa May 7, 2010 at

I got my bill with the changes: it doesn’t look good.
Because I am retired and on a fixed income I can only pay so much a month but the card co. wants $70 more, which I cannot afford. I am getting depressed seeing that I cannot do any of the activities that make life worth living. I am considering bankruptcy but prefer not to. Is there anything out there that can help with this situation?
I’ll appreciate any/all advise.
Thanks for the info on your blog,

Isa

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