The Smackdown on Credit Cards Has Been Approved

As anticipated the Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union Administration, all approved the proposed regulations on credit card practices.

The regulations will prohibit banks from practices like applying payments in a way that maximizes interest penalties and raising interest rates on pre-exisitng credit card balances.

This will also end the double billing cycle, which averages out the balance from two previous bills. Which means consumers carrying a balance will no longer get hit with retroactive interest on their previous months bill.

Another great regulation will prevent universal defaults, which was a policy that allowed credit card issuers to increase the interest rate on one card if a customer missed a payment on another.

These new regulations come just in time amidst the current economic situation. But is it in time? Although the regulations have passed, they are not going to take effect until July 2010.

I have heard so many stories of how these current practices are effecting consumers. A small business owner had most of his debt on credit cards. They had a 0% APR until January 2009 and would go up to 7.99% thereafter. One time his payment was received a day late. The credit card company, Advanta, then jumped the APR to 25.39%.

Most credit card companies allow consumers to opt out to prevent the increase from occurring, but are having their cards closed because of it. They are able to keep their lower interest rate, although it is unknown for how long, but can no longer use their credit line.

Some consumers are making their payment on time and are having their line reduced as soon as they make a payment. For a struggling business owner this could be the nail in the coffin. Depending on their credit limits to buy inventory or materials having their line closed or reduced can be disastrous.

These new regulation's are going to be great, but are they in time to save the ailing consumers and in turn the economy.

[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]

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