The Credit Card Reform Bill of 2009 is a set of laws and regulations that will govern card issuers more closely and eliminate some of the business practices that cause people to wind up deep in debt.

The reform, which many say would have never passed a few years ago, is a testament to the state of our current economy – partisans on both sides agree that changes need to occur before American’s sink into a debt they cannot escape.

If you already have an existing card balance, the Credit Card Reform Bill means some very welcomed changes are coming your way.

Here is what to expect this February:

Interest Rate Control

Card holders are now protected from interest rate increases on the money that they already owe for at least the next 60 months or 5 years. Banks must now give 45 days of written notice before increasing interest and when the new rate goes into effect, it will only be applied to future purchases made with your card.  Any balances that you already owe will be unaffected.

The new reform does not place a cap on interest rates overall, but it does hold banks much more responsible.

Payments

By law, card issuers must provide you at least 21 days after receiving your monthly statement to make a normal payment.  When you do pay, the total will always be applied to the balance with the highest APR to pay that debt off first – which will save you money on interest in the long run.  This will make a tremendous difference for people with variable rates that are constantly fighting increases.

The new credit card reform also mandates that changes be made to make paying more  convenient for you.  This means that deadlines will not be set before 5:00pm in case you are working and the removal of fees on payments made via phone.

Your Statements

Your monthly statements will contain some big new improvements which will help you to make more informed decisions about your finances.  Expect to see a time line showing how long it will take you to get out of debt based on how much you are currently paying over the required minimum.  You will know how much that you need to pay each month to be debt free in 12 months, 24 months, etc.

Your new statements will also disclose exactly how much interest that you pay from month to month, rather than obscuring it as is common with some cards now.  Once again, you will have at least 21 days between receiving a statement and the due date.

Rules for New Cards

Younger people and students applying for a new lne of credit are going to be screened more closely under the new reform bill and may need a guardian or someone with more established credit to co-sign for them.  They will be required to show proof of income or sufficient funds before they will be issued a new card.

In Summary

The new Credit Card Reform Bill will help people to make smarter choices for keeping themselves out of debt, and attempts to reign in some of the power that the banks currently have over card holders.

What’s the catch?  If you are more than 60 days late when making a required payment you forfeit all the new protection that this reform offers – so make sure that you pay on time!

America holds the most credit debt out of any country in the world by a long stretch, this is one small necessary step to educating the public about their use of credit cards.

Why make the banks richer? Instead, save your money for something more exciting, such as backpacking travel!

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