Congress Approves New Credit Card Rules

Yesterday, the Senate approved the Credit Cardholders Bill of Rights Act with an overwhelming 90-5 vote. The House (of Representatives) followed up with a 361-64 vote in favor of the bill. The bill only has to be signed before the President before becoming law. The new laws will go into effect one year after being signed by the President or June 30, 2010, whichever is first. That means it will be more than 12 months before consumers see the benefits of the new rules. Fortunately, there is a clause in the rules that prevent creditors from increasing interest rates 90 days after the law becomes effective unless they first give a 45-day notice. They also have to explain how the interest rate increase effects the balance.

Many experts foresee dramatic changes in the way creditors do business. First, they expect a withdrawal in the amount of credit that's extended, even to creditworthy borrowers. Credit card rewards may be a thing of the past. Finally, annual fees and higher interest rates may become commonplace as credit card issuers try to find ways to remain profitable. By profitable, I mean continue making billions of dollars in revenue each year.

The new rules bring much-needed changes to the credit card industry. But one particular group of people will find it harder to get a credit card. Young adults under 21 will have to prove they can repay a credit card balance or get a parent to co-sign before they can receive a credit card.

Other key changes include increased notice before increasing an interest rate, more time for cardholders to make their monthly payment, elimination of double billing cycle finance charges, and limits on the universal default clause.

What's your take on the new credit card rules?