New Credit Card Statements Could Help Consumers Decrease Debt

This is a guest post by Bill Hardekopf, CEO of LowCards.com.

Consumers will soon receive their first credit card bill since last week’s implementation of the CARD Act and their statement will look very different.

“The new debt information on your credit card statement is one of the best provisions of the CARD Act and it will benefit every cardholder,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.

The most significant change in your statement will be a chart which will clearly show how long it will take and how much you will actually pay should you make just the minimum payment each month. In addition, the chart will display how much you need to pay each billing cycle in order to completely pay off your balance in three years.

Suppose you owe $3,000 and your interest rate is 14.4%. Your statement would show that if you made no additional charges and paid only the minimum payment, it would take almost 11 years to pay off the balance at an estimated cost of $4,745. In addition, it would show that if you wanted to pay off the balance in three years, you would need to pay $103 per month and it would cost an estimated $3,712.

“Consumers will be shocked at how long it takes to pay down a balance and how much interest is actually paid if you are only making the minimum payment. When people see this personal information clearly presented in black and white, it should have a significant impact on getting consumers to pay off their credit card balance in a much more timely manner. Cardholders can’t ignore reality when they see the numbers each month on their credit card bill,” says Hardekopf.

An example of the minimum payment table can be found on the Federal Reserve website.

Consumers will see several additional changes on their credit card bills:

• Your statement should be much easier to understand. Fees and interest charges should be highlighted and explained in simple language in a legible font size, not buried in fine print.

• Your statement should give a toll-free number for counseling assistance from legitimate nonprofit organizations. Issuers are required to provide contact information for three organizations that have been approved by the United States Trustee or a bankruptcy administrator to provide credit counseling services in, at the card issuer’s option, either the state in which the billing address for the account is located or the state specified by the consumer. The National Foundation of Credit Counseling (NFCC) has added help lines to meet the expected increase in consumer assistance under the government’s new regulation.

• Some issuers will give a summary of total fees and interest paid to date during the current billing cycle and year to date.

Not only will your bill look different, but the delivery and due dates may also be different. Pay attention to the due date because it is possible that your due date has changed as a result of the provision that requires at least 21 days notice before your due daye. Your due date now has to fall on the same day every month. The payment cut-off time cannot be earlier than 5PM on the due date. If your payment due date falls on a weekend or holiday (when the company does not process payments), you will have until the following business day to pay without penalty.

These statement changes may belimited to or be most effective for those with paper statements. If you have online banking without a paper statement, you will miss these numbers about your debt. You may have to go looking for it in a PDF file instead of it being delivered directly to you. According to a recent AP story, the biggest banks are not putting the minimum payment on the online account summary page. Bank of America, Chase, Citi and others say they are educating customers through mail and email about the new statements. Capital One is using banner ads about the new disclosures when cardholders log on.

“Banks should act in the spirit of the CARD Act and also make the minimum payment information easily available to online accounts,” says Hardekopf.

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LowCards.com simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card. The LowCards.com Complete Credit Card Index is the most objective and comprehensive resource on the Internet which allows consumers to compare rates for all 1260 credit cards offered in this country. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for eight years.

Significant Credit Card Changes Proposed by the Federal Reserve

This is a guest post by Bill Hardekopf, CEO of LowCards.com.

Today, the Federal Reserve proposed a rule amending Regulation Z (Truth in Lending) to protect credit card users from unreasonable late payment and other penalty fees, as well as requiring credit card issuers to reconsider increases in interest rates. This rule will go into effect on August 22, 2010.

“This proposal addresses two key costs of using a credit card–fees and interest rates,” said Federal Reserve Governor Elizabeth A. Duke. “The rule would prevent credit card issuers from charging large penalty fees for small missteps by consumers and would require issuers to reevaluate rate increases imposed since the beginning of last year.”

The proposed rule would:

• Ban inactivity fees. Some issuers have recently instituted an inactivity fee if there are no transactions on your credit card for a certain period of time.

• Force issuers to evaluate rate increases. At least every six months, credit card issuers must reevaluate annual percentage rates increased on or after January 1, 2009 and if appropriate based on their review, reduce the annual percentage rate applicable to the account. This includes changes in the consumer’s creditworthiness, and to increase in the rate due to change in market conditions or the issuer’s cost of funds. However, the statute also expressly provides that no specific amount of reduction in the rate is required.

• Stop credit card issuers from charging penalty fees that exceed the dollar amount associated with the consumer’s violation of the account terms. Card issuers would no longer be able to charge a $39 late fee for a $20 minimum payment. The fee could not exceed $20.

• Require credit card issuers to provide reasons for increases in rates.

• Prevent issuers from charging multiple penalty fees based on a single late payment or other violation of account terms.

“These are significant changes in the credit card industry that will help every cardholder. But if history is any indicator, credit card issuers will find new ways to make up for the revenue they will lose when these rules take effect in August, and those changes could be in the form of new or increased fees,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.

This proposed rule represents the third stage of the Board’s implementation of the Credit Card Accountability Responsibility and Disclosure Act of 2009. In July 2009, the Board issued a rule implementing the provisions of the Credit Card Act that went into effect on August 20, 2009. In January 2010, the Board issued a rule to implement the provisions of the Credit Card Act that went into effect on February 22, 2010.

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LowCards.com simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card. The LowCards.com Complete Credit Card Index is the most objective and comprehensive resource on the Internet which allows consumers to compare rates for all 1260 credit cards offered in this country. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for eight years.

Credit Card Debt Declining at Record Level

This is a guest post by Bill Hardekopf, CEO of LowCards.com.

Data released last Friday by the Federal Reserve shows that the consumer debt is declining at a record pace.

The Federal Reserve Consumer Credit report reveals that credit card debt fell in November for the 14th consecutive month. Revolving credit, the majority of which is credit card debt, decreased at an annual rate of 18.5% in November. This is the largest percentage drop ever recorded. It has fallen over $100 billion since October of 2008, from $976.1 billion to $874.0 billion.

Another report, The Credit Card Index from Fitch Ratings showed that delinquent balances on U.S. credit cards reached record levels. The 60+ day delinquency rate reached an all-time high of 4.54% for the December 2009 index, which is based on performance data through November month end. This surpassed the previous high of 4.45% set in June 2009.

“These credit records show that the lending crisis continues. Consumers are still having problems paying off what they owe on their credit card balances. Issuers are still charging off accounts. Banks are working to reduce their loss rate. They are reluctant to make new loans and have tightened lending standards. Meanwhile, consumers are cutting back on using credit cards and reducing their credit card debt,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.

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LowCards.com simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card. The LowCards.com Complete Credit Card Index is the most objective and comprehensive resource on the Internet which allows consumers to compare rates for all 1260 credit cards offered in this country. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for eight years.