Credit Cards: Dr. Larry Sayler Gives Insight Into Credit Card Use

Published: April 13, 2021

By Larry Sayler
Money Wise, Light & Life Magazine March/April

Many financial counselors recommend not using credit cards at all. But if you do use a credit card, you ought to be aware of several changes. On May 22, 2009, President Obama signed legislation regulating credit cards. Some portions became effective in August 2009; most were effective February 22, 2010; a few provisions do not kick in until August 2010. Numerous changes definitely benefit consumers:

• Payments greater than the minimum amount due must be applied to the balance with the highest interest rate. Previously, most credit card issuers applied additional payments to the balance with the lowest interest rate.
• Over-limit fees cannot be charged unless the consumer specifically authorizes over-limit transactions.
• Interest rates cannot be retroactively changed on existing balances in most cases, unless the account is 60 days delinquent.
• Interest rates cannot be raised for the first year after an account is opened. Promotional rates must last at least six months.
• Statements must be sent at least 21 days prior to the due date (not the 14 days previously required).
• Fees cannot be charged for paying by mail, phone, Internet or electronic transfer - except for expedited service.
• Payment due dates must be the same day each month. If this falls on a weekend or holiday, the due date is the following business day. Also, payments do not count as late if they are made by 5 p.m. (EST) on the due date.
• Interest rates cannot be increased due to a consumer's late payment of unrelated bills.
• How long it will take to pay the full balance if the cardholder makes only minimum payments must be disclosed to cardholders each month. In addition, the issuer must indicate the payments required to pay off the balance in 12, 24, and 36 months.
• Monthly statements must provide the issuer's phone number and Internet address.
• Notice of any changes in terms must be given at least 45 days in advance (up from 30 days previously).
• Consumers have the right to reject changes proposed by the credit card company, cancel their accounts, and pay off the existing balances (under the current terms) over five years.
• People under 21 must show proof of financial responsibility or have someone cosign.

It is important to note that some things are still allowed under the terms of this legislation:

• Although the timing and required notification of rate hikes are regulated, the amount is not limited.
• New or increased fees are not prohibited. Consumers should expect annual fees, fees for accounts with no or low activity, and many other items.
• Credit limits can be lowered without notice. A lower credit limit results in a larger percentage of your available credit being used, which likely reduces your credit score. (For information on credit scores, see the "Money Wise" column in the March/April 2009 issue of Light & Life.)
• Many credit card issuers are increasing the required monthly payment, for example, from 2 percent to 4 percent of the outstanding balance.
• Consumers should expect significantly fewer rewards.

What should be your response? Use credit cards sparingly. Don't charge something unless you can pay it off in full at the end of the month. If you cannot pay in full, stop charging new items and get your balance paid off as quickly as possible before using the card again.