Don't get me wrong. I think we need to tighten the reins on banks and get them to stop their abusive practices that squeeze billions of dollars from consumers every year. It's just that if this piece of legislation becomes law, the credit card companies will have 12 months before they have to change their ways.
What would you do if you were an executive at a credit card company? Chances are you'd try to squeeze every last dime you could out of your existing customers before the new rules are implemented. Here's what I envision:
- If it hasn't already happened to you, your interest rate may suddenly jump higher for no reason.
- Then, banks might apply that new and higher interest rate retroactively to balances you're already carrying.
- Your payment could suddenly get "lost in the mail" so you get stuck paying late fees.
- And, you might even get charged interest on payments you've already made.
But there is some good news for consumers. Banks have already stopped some of these despicable practices on select cards. With the help of credit-card comparison website BillShrink, the Wall Street Journal found companies that are already complying with the new rules. And if you check out BillShrink's handy tool, you can type in your credit card and see which guidelines your card is currently following.
Finally, don't forget that you aren't powerless against the big banks. You can shop around and try to transfer your balance to a more competitive card.
Although the majority of credit cards are issued by a handful of players (including Bank of America, Capital One, Citigroup, JP Morgan Chase, and American Express) don't forget to check out offers from credit unions since they tend to have lower interest rates and friendly billing practices. For example, you'll never get whacked with the 20 plus percent interest rates some banks charge since cards from federally chartered credit unions can't charge more than 18 percent and their rates average below 12 percent.
Assuming this piece of legislation gets passed by the Senate, President Obama is expected to sign it by Memorial Day. In the meantime, watch your mailbox carefully for a letter from your credit card company.
Credit Cards image by Andres Rueda, CC 2.0