Credit card laws are the laws that govern the way the credit card companies must operate. You don’t usually hear much about them. That’s because most of them are just basic laws—the type that keep anyone from doing illegal things. But credit card laws are under review and changing as we speak.
Consumers and lawmakers are trying to put credit card laws into affect that will stop the credit card companies from changing their terms at will. You might not realize it, but your credit card rate of interest can be adjusted at any time. You don’t ever have to be late on a payment.
How can they do this? Isn’t there a law preventing it? No, there isn’t. And that’s one of the problems.
If you owe money to Joe and Bob, and you’ve always paid Joe on time but you’re late with Bob’s payment this month, should Joe charge you more? Of course not. And if Joe and Bob were your friends, Joe raising your payment or your interest over a late payment to someone else would probably cause some problems.
But that’s exactly what credit card companies are doing. You can be the best credit card user in the world. You’ve never even made a late payment, and you often pay more than the minimum payment. Make a late mortgage payment or a late payment on another card, though, and see what happens.
Some of the credit card companies stopped this practice after consumers complained. Others hold to it. They can raise your rates and slash your credit line based on that late payment to someone else, calling you a credit risk. In fact, if they review your credit report they can decide to do both those things just based on how much credit you have and how much you’re using.
Credit card laws don’t stop them from raising your rate if they only think you look like you might get into debt trouble eventually. Which is basically a free pass that lets them raise rates and slash credit lines anytime they want. That’s not fair.
They also regularly deal underhandedly with consumers by charging variable rates on the way you use the credit cards. That in itself isn’t dirty dealings. But they way they handle your payments in regard to those rates are.
Say you’re getting a low rate on that balance transfer. Many cards will do that but you’re paying high interest on purchases. You know that, so you’re not bothered. When you make your payment though, where do you think they apply that payment? They lower the amount that you’re already not being charged interest on.
The amount of money sitting there charging you 18% interest doesn’t change. They automatically apply all payments to the amounts with the lowest interest rates to keep you in debt longer and paying more interest.
Many people have no idea that their payments are applied that way. Credit card laws being considered today will also remove the company’s rights to rewrite their contracts with you anytime they want.