Consumers paying credit card debt continue to face obstacles to becoming debt free. It’s important to open and read all correspondence from credit card companies to keep up with their efforts to confuse and keep you in debt. Legislation governing credit card practices becomes effective in February, but it doesn’t provide consumers with all of the protections needed to prevent problems with credit card debt.
Debt Management: New Law Doesn’t Cover Everything
Here’s what the law will do:
Retroactive rate hikes prohibited: This means that higher interest rates cannot be applied to balances incurred before the interest rate change becomes effective.
Statements must be mailed a minimum of 21 days before payment due dates: Consumers tend to budget for paying bills on a monthly basis; sending statements a few days before payment due dates can cause late payments and additional fees. You can avoid additional charges by paying credit card bills on receipt and setting up payment reminders on your computer or calendar.
Payment due dates can’t be shifted without sufficient notice: Another trick some companies use is changing payment due dates. Missing a payment by as little as one day can accrue a late fee, which is added to any balance owed. Open or read statements immediately and check due dates.
Wake up call on making minimum payments: Credit card statements must include information about how much interest you pay and how long it takes to pay off your balance based on making minimum payments.
Minimum requirements for change in terms notification: A minimum of 45 days notice must be provided to change the terms of credit card agreements. If you don’t accept the change in terms, you can notify the company prior to the effective date, but your account is then closed. This can negatively impact your credit scores; if you’re trying to improve your credit scores, it’s better to pay off your balance without closing your account.
No Limit on Interest Rates, No Help for Small Business
Unfortunately for those carrying balances, no limits were placed on the interest rates that credit card companies can charge. Many credit card companies are increasing interest rates in anticipation of the new regulations that are becoming effective. Credit cards issued to small businesses are not protected under the new legislation; if you have small business credit cards, beware of rapidly increasing interest rates and fees. Knowledge is your best defense against increasing credit card costs; if you’re having problems making payments or need help with debt management, debt consolidation and consumer credit counseling can help with debt management.
Debt management companies advertise aggressively on TV, radio, the Internet, and in newspapers. Many of these companies promise the moon and the stars when it comes to debt reduction. Before signing up, here are five things to remember about debt management.
Debt management companies can help you with credit card debt, but you’ll pay a lot of fees. Generally, you’re required to sign up for a debt reduction plan that involve making regular payments to the debt management firm. The debt management company negotiates lower payments or a payoff amount with your creditors, and makes the payments to them. Read the rest of this entry »
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno. She enjoys writing informative articles about debt management and personal finance.