James Guess: The Legal Lowdown on Credit Cards 2009


Credit cards do not put people in debt, financial decisions that people make is what put them in debt! On May 22, 2009, President Obama signed The Credit Card Holder’s Bill of Rights Act into law, which could potentially help people become debt free quicker.

This new legislation will dramatically help the roughly 50% of American consumers who have charged nearly $1 trillion, and carry an average balance of $8,000. Twenty percent of those who carry a balance are paying more than 20% interest on that balance.

Most of the new legislation will not become effective until early 2010, but it will finally use some common-sense methods regarding interest rates. For example, it prohibits lenders from increasing interest rates on existing balances (stuff you already charged) unless you are more than 60 days late on your bill.

And if you actually fall behind on paying your credit card bill and the rate is increased, the lender must restore the lower rate if you have paid your bill on time after six months. Also, borrowers are required to have periodic payment history reviews by their lenders and have their rates decreased if indicated by the review. This may be hard to actually enforce since it goes against the lender’s interest (no pun intended).

Furthermore, the law will require borrowers to receive at least 45 days notice before their interest rates are increased on new purchases, regardless if the customer is late or delinquent. This will help borrowers make better decisions and give them more time to create a plan before they are penalized with a higher interest rate.

Also, the notorious “pay to pay” concept will be disallowed. How are you going to charge me for paying my bill? No more will customers be charged for paying their credit card by mail, phone, or electronic transfer, except for live person or expedited services.

One of the most effective pieces of this law is the part that requires lenders to tell borrowers how long it will take, and how much interest would have been paid if only the minimum monthly payments are made.

Let’s face it! We live in a payment plan world, where most consumers do not care how much they pay for things, all they want to know is whether or not they can afford the monthly payments. Hopefully, borrowers will realize it is not worth paying for something twice and being in debt twice as long by making minimum monthly payments.

The Credit Card Holder’s Bill of Rights also has additional protections for students and gift cards as well. And no more over the limit fees, unless you decide you want to be allowed to go over the limit. Why would you? For more information and the complete bill of rights law visit www.govtrack.us and search for bill H.R. 627. 

Create Wealth, Enjoy Life!

James “Bird” Guess
President & Founder
$chool of Money & Wealth LLC


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