| May 20, 2009

Congress Sends Credit Card Reform Bill To President Obama

What does this mean for you?

Congress sends credit card reform bill to President Obama. What does it mean for you?

The landmark credit card legislation passed today has been hailed as a massive win for consumers, providing relief from soaring interest rates and fees, while making it tougher to hook young people on credit cards.

Who will be the biggest winners, who won’t be helped much and who might get the shaft? We asked the experts.

Q: What type of consumers will benefit the most and in what way?

A: If you maintain a reasonable ongoing balance on your credit card, you are in luck. This new legislation will place a number of restrictions on the way credit card companies can increase your rates and fees.

From now on, new rate hikes will largely only be applicable to your new balances, as opposed to being retroactive. That means if your credit card company raises your interest rates, then the new higher rate will only apply to your new charges, not to your preexisting balance.

Q:What type of credit card problems WON’T be solved by this bill?

A:If you are in way over your head, this won’t help.

While there will be new rate caps and limits on fees, “there is no legislation that will help a consumer that got themselves terribly overextended,” said Manhattan certified financial planner Charles Failla. “If your balance is so high that you can not realistically ever pay it off, then this legislation won’t help.”

Q.What are the possible negative consequences and who would be affected?

A.People who pay their bills on time each month and do not carry a balance could take a hit with “the return of the annual membership fees and fewer rewards,” said Ben Woolsey, director of marketing and consumer research for creditcards.com. Woolsey added, it could make it harder for some people with low credit scores to get credit cards, as credit companies will look to reduce their risk.

Q.What should you do now to be responsible with credit cards?

A.Be aware that it will take nine months until this law goes into effect. “Banks can still increase interest rates on existing balances before the law goes into affect,” Woolsey said.

As a result, it has never been a better time to get wise about debt and the way you use your credit cards.

“Pay your credit card bills on time, pay more than the minimum amount and don’t exceed your credit limit,” said Bill Hardekopf, CEO of lowcards.com.

“It all boils down to living within our means,” added Failla.

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