New Credit Card Protection for Consumers (Finally!)

Some good news for consumers: The feds have finally set some new rules that will protect consumers from credit card companies increasing interest rates on their existing balances. You can read more about the new rules here, but here are the top reasons why I think this will benefit consumers:

1. Longer grace periods. Card issuers must mail statements 25 days before the due date. Today, some mail them 14 days before the due date.

This gives cardholders time to make their payments from paycheck funds instead of digging into savings. This will also result in fewer late payments and help consumers to maintain or improve their credit scores.

2. Fair allocation of payments. Now issuers will have to apply over minimum payments the balance with the highest rate instead of being at the issuers discretion. This will help them to maintain some control over balances and allow consumers to pay down the more expensive balances faster.

3. No more universal default. Issuers won't be able to take adverse actions against consumers if they make unrelated late payments on other accounts. This would be prohibited under the new rules. Many issuers publicly object to universal default yet practice it.

4. Fees will be reigned in big time. No more "fee harvester" cards that take advantage of desperate consumers looking to get a card at any cost.

In many cases these cards have low credit limits that can be largely used up by the fees even before the card is used.

5. No more double cycle billing. This is already a thing of the past but the new rules will officially retire the practice. Double cycle billing is the practice of an issuer calculating interest on a daily balances from more than just the previous 30 days.

The bottom line is that while the new rules are going to help many of us, they don't go into effect until July 2010, although I predict many will comply much earlier. The need for these new rules underscores the importance of maintaining zero balances on credit card.

John Ulzheimer is a nationally recognized credit expert, president of Consumer Education for and contributor to On The Money. Learn more about him at