The Credit Cardholder’s Bill of Rights of 2009 makes some significant changes in the way your credit card issuer treats your account. Among other things, the law puts an end to double-cycle billing, gives you more time to pay, and imposes fairer payment allocation.

You may not have been aware that the double-billing cycle was costing you money each month. In most cases, it didn’t amount to a lot of dollars, but spread over millions of cardholders, it was an income-booster for credit card issuers. Under this practice, finance charges were imposed on the average balance of both the current month and the previous month. So you paid interest on dollars you no longer owed. This could be significant if you’d made a large payment the previous month.

Under the new law, banks will not be allowed to charge interest on debt already paid.

Another provision, which goes into effect this August, will require card issuers to mail their statements 21 days before a payment is due. The current requirement to mail 14 days before the due date has caused many consumers to incur late payment fees. Cardholders could either mail the payment and hope for the best, or pay a fee to make a payment by phone or internet.

Many credit card issuers charge as much as $15 to take a payment over the phone or on line. (Some do offer free on-line payments.) Under the new law, banks will only be allowed to charge those fees if you are asking for an “expedited payment.” Also, if you make a payment at a local bank branch, they will be required to post that payment the same day it was made.

Credit cardholders get a huge break due to the new payment allocation rules. Right now, when your account shows balances at different interest rates, your bank automatically applies all of your payments to the balance carrying the lowest interest rate. You may have charged a $200 purchase that gathers interest at 29.9%, but you can’t pay it off because you used a $3,000 cash advance check that was offered to you at 4.9%. Before you can “get to” the $200 purchase, you have to pay off the entire cash advance.

No more – when the new laws go into effect, all amounts in excess of your minimum monthly payment will be applied to the balance with the highest rate of interest.

This entry was posted on Monday, June 8th, 2009 at 3:56 pm and is filed under credit cards. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.