Credit card companies have rightfully gotten a bad rap for having very confusing terms and conditions in their card-holder agreements and charging inappropriately high interest rates for just about any reason they choose. Many credit card companies adopted universal default provisions which allowed them to raise your interest rate to whatever they please with just 15 days notice. When these types of notices do come in the mail, they are often written very cryptically and consumers rarely know what changes are actually going to occur with their accounts. In response to these issues, the Federal Reserve has created a new set of rules for credit card companies to follow which will empower consumers to have better control of and better information about their credit card accounts.
Previous credit card companies could change your contract and raise your interest rates to an exorbitant interest rate and only give you 15 days notice before they did so. Companies are now required to give you 45 days notice before they can change the interest rate on your credit card. This will give you plenty of time to switch cards and transfer your balance to avoid a change in your terms and conditions which are very consumer unfriendly.
In addition to providing you better notice, credit card companies are required to provide much more readable information about the terms of your agreement. Previously you would get a credit card agreement written in very small type written in legalese that was almost impossible to read. Now credit card companies will be required to tell you what sort of penalties you will face in the even that you make some error or pay your bill late and do so in a manner that’s simple and easy to read.
Credit card companies will be required to inform consumers about what rewards the card offers in a way that’s easy to understand. When you transfer a balance, credit card companies will have to make it clear what the interest rate will be on the money you transfer and on any other money in your account.
Currently when you pay on a credit card, the money you put in will go towards the part of your debt with the lowest interest rate, but after the rule change the money you put in will be applied to the part of your debt with the highest interest rate.
Credit card companies are extremely unhappy about these rule changes because it hinders them from doing making use of some of the anti-consumer practices they have been using to hedge their profit margins in the last several years, but these changes will make credit cards much more consumer friendly and empower consumers to be better informed about the terms of their credit card agreement.