Did you know the credit card companies’ rules are changing?

Credit card companies have always had tricks for capturing fees and extra interest from the unknowing card user. Recently, legislation was passed on how credit card companies handle the hikes in interest rates and fees. Much to the credit card industries dissatisfaction, big changes are coming!

Let’s take a look at how these can effect you.

Credit card companies will now have to give cardholders forty-five days notice before their interest rates are raised. What does this mean? Well, those days of opening your statement and seeing interest rates jacked up 5 or 10 or 15% and more because of you being one day late are over! Now, if there is a rate hike you’ll have time to pay off or transfer the balance to another card before getting cracked on the wrist, or rather dinged in the wallet, for being late. 

Banks are now required to mail your credit card statements no later than twenty-one days before they are due. In the past, some credit cards standard operating procedure was to send their statements just a few days before they were due. Why? It’s all about money! A late charge here or a late charge there throughout the year, and you’ve added an extra $100 or $200 to the credit card companies coffers. Multiply that, by a few million cardholders and suddenly late charges are an income on their profit and loss statement that will make your head spin!

These same credit card companies try and tell you that this is not their intent. Believe me, this 21 day change alone will cost them millions in unjust charges and save you perhaps hundreds of dollars a year just because they give you ample time to mail your payment in.

Speaking of late fees, if you get your payments in by 5PM on the due date you will no longer incur a late charge. This eliminates that 12:01 AM deadline joke! This is something I never understood. Why have a deadline, of let’s say the 25^th of the month at 12:01 AM? If you want it in at midnight then just say the deadline is the 24^th. In addition, if the deadline falls on a holiday or a Sunday when the bank is closed the new law allows your payment to be processed the following day without incurring a late charge.

Another big change in the new law is to credit your payments to the balance with the highest interest rate rather than the balance with lower interest rate. In the past it was common practice if you owed say $5000 of which $2500 were misc charges at 8% and another $2500 was cash advance at 18%, to post your payment to the balance at 8% interest. This would mean your overall balance would be charged at the higher rate, thus it became much more difficult to pay off.

In addition, on cash advances the banks require your explicit permission in order to go over your providian automatic credit limit increase. This means no more check postings that you would be hit for an “over credit limit” charge which could also trigger a hike in the interest rate.

Overall, these changes will make it harder for the credit card companies to hold you in financial bondage by hindering your ability to pay off your accrued debts.  Keep in mind that this doesn’t mean you’re in the clear. You still need to be a good money steward, staying within your budget and making your payments in a timely manner. 

Be bold!

You get a new online credit card reports in the mail and just can’t wait to get some shopping done. You go and put a nice big balance on that nice new card just to break it in. In fact, you heard that having a balance on a card is a good thing. Well, sorry to disappoint you but doing so could hit your credit scores 6 ways. You have an inquiry on your credit report (1), you have a new account (2), you have a new account with no history (3), you have a new account with a balance (4), your balance could be over 45% debt to credit limit ratio (5) and you now have too many revolving charge cards (6).

The solution is to be cautious with your new credit card. You do not have to use it right away and instead use it for emergencies only, but be sure to use it a little every six months. A little means as little as a dollar every six months.

Credit limits are an important factor in your credit score because of the debt to credit limit ratio. The lower the ratio the higher your credit scores because the credit bureaus want to see that you can control your spending. If you have a high credit limit and have the option of using up the entire credit limit, but don’t, then you become a low risk user and deserve to have a higher credit score interpretation.

The solution then is to increase your credit limits and keep your balances low. The higher the credit limit with a low balance, the lower the debt to credit limit ratio the higher your credit scores.

There are home purchases we make sometimes that require a special loan that can be very costly to our credit score and trans union. The main reason is that we are getting in over our head with a debt we can’t afford. The loans that are offered are interest only, buy down loans, adjustable rate mortgages, and option adjustable rate mortgages. Each of these spells disaster if we really can’t afford them and the slightest glitch in our income with cause a ripple effect with other debts and loans that you might have. The cost of coarse would be that you have lates, then can’t pay at all, foreclosure with loss of house and home and perhaps even bankruptcy. The ratios by mortgage lenders to give you only so much mortgage to so much debt is because the ratios have proven themselves to be correct.

The solution is to go to your mortgage lender and get pre-qualified to find out how much you can afford and then go shopping for a and don’t go over the amount you qualify for. This will keep you safer in affording the home you purchase and the mortgage you can get with the lowest rate possible. A fixed rate always seems to be a better, safer way to go than any exotic type mortgage.

NOTE – there are interest reduction programs out there that help to reduce interest of all kinds to pay off your total debt in 1/3^rd the time of conventional financing. You will pay 2/3rds less interest by comparison when dealing with these companies. Your spending habits will hardly be affected. In fact, it’s letting your money work for you instead of you always working for your money. We suggest going to the back of this book and see whom we recommend to talk to and get some information about saving even more money. Some we know have saved hundreds of thousands of dollars and paid a 30 year mortgage and credit card debt in as little as 7 to 10 years. Kind of a no-brainer.