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Candice Choi

Confusion persists about the new credit card law, and not all the rules are final

By Candice Choi
Associated Press / June 10, 2010

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Heads are still spinning over credit card bills and charges. Earlier this year, the enactment of consumer protections mandated that cardholders receive more detailed monthly statements. Yet there’s lingering confusion. Some questions from readers:

Cardholders must be given 45 days’ notice before an interest rate increase. Yet I’ve heard banks can start charging the higher rate after just 14 days. Is this true?

To an extent. Let’s say you receive a notice your interest rate will rise to 15 percent, from 10 percent. Two weeks later, you make a $100 purchase. The new charge will incur the lower interest rate. Once the 45-day notice period ends, the higher interest rate can apply to the remaining balance on any purchases you made two weeks after you got the notice.

The idea is to prevent consumers from using the 45-day window to run up charges at the lower interest rate.

Are there any new limits on penalty fees?

Not yet. But the Federal Reserve is expected to set some ground rules in coming weeks. In March, the Fed proposed capping penalty fees to the dollar amount of the violation. So if you went $10 over a credit limit, the fee couldn’t be more than $10.

The proposal would also limit late fees to no more than the minimum payment required.

Final rules may differ from the proposals.

My bank is requiring a higher minimum payment. Are there any rules on that?

For existing balances, banks can’t raise the minimum payment to more than double the previous rate. So if your minimum was previously 1 percent of the balance, your bank could raise the rate to 2 percent.

There is one exception: The rate could also be raised to the amount necessary to pay off the balance in five years.

A card issuer can also raise the minimum payment for purchases going forward. As long as banks give 45 days’ notice, they can raise the required minimum as they see fit.

Why has my payment due date changed?

The new law requires that due dates fall on the same date every month. Statements also need to be sent out 21 days before a payment is due. Previously, banks sometimes sent statements not long before payments were due.

Can a penalty charge, such as a late fee, push me over my credit limit?

No. And banks can charge only one over-the-limit fee per billing cycle. And you can only be charged a total of three consecutive times for a single over-the-limit occurrence.

Under the new law, banks can no longer automatically enroll cardholders for over-the-limit coverage, either. Consumers must opt into it. That’s to prevent consumers from inadvertently spending more than their credit limits.

Candice Choi writes for the Associated Press. She can be reached at cchoi@ap.org.