Updated 08/24/2010 09:56 AM
New credit card rules will help consumers better manage debt
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Monday, Baylor University's bookstore was filled with students as many headed to their first class of the semester.
Many students were using credit cards to pay for their books. A new Credit Card Accountability, Responsibility and Disclosure Act is helping students better understand their statements. Even though the law was passed in May 2009, the final rules were put into effect this week.
Heather Dunnam is good about checking the prices for each book, but she admits the same cannot be said for how closely she looks over her credit card statements.
"I definitely just look at it when I can, and I'm not the best at taking that time," she said.
The new set of rules will help Dunham better understand her statement.
According to University of Baylor Associate Professor of Finance Franklin Potts, the last set of rules focuses on fees and interest rates.
Under the latest change to regulate certain practices by credit card companies, consumers can no longer be charged a fee for not using their card.
While there are fees for late payments, it is limited to $25 in most cases. Credit card holders can also avoid over-the-limit fees all together by opting to cap their spending once they reach their credit limit.
But Franklin said credit card companies will probably make changes of their own.
"Before there were a lot of credit cards, you could get with no annual fee. Most experts believe more and more people will have to pay a fee especially if you have bad credit," he said.
The new rules also involve changes on how credit card companies handle interest rate changes.
Consumers must be notified 45 days before companies make changes to interest rates. Also, companies must now provide a reason for the change in rates and reevaluate the rate every six months.
"What credit card companies have done to protect themselves against this new law, they're going more and more to variable rate credit cards," Potts said.
Regardless, Dunnam said she is looking forward to the changes.
"I think most of these changes are going to be really positive," she said. "Especially for students, my age, who might not be the best at figuring out finances for themselves."
But Potts is not so optimistic.
"No matter what kind of legislation they pass, somebody will always find another way to confuse consumers and take advantage of them if they don't understand finance," he said.
While many of the rules apply to credit cards, your gift card is no longer subject to annual fees or inactivity fees. The card can still be closed though.
Contact your credit card company to find out if your account is affected by the new rules.