Will Credit Card Act Do More Harm Than Good?

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New credit card legislation passed last year by Congress is set to take effect later this month.

The new rules are designed to give responsible consumers a break, while keeping credit out of the hands of those who don't qualify.

Financial advisor Rodney Ballance appeared on the CBN Newschannel's Morning program to offer more information about the new credit card rules.  Click play to watch the interview.

However, some are questioning whether the new rules actually do more harm than good.

Saving Consumers Money

On February 22, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 becomes the law of the land, bringing big changes for borrowers.

Under the new rules, banks will no longer be able to raise rates on existing balances unless a borrower is at least 30 days late on paying the minimum due.

"The mere fact just a few days or a few hours in the past can cause a late fee to take effect immediately seemed to me unfair and I'm glad to see that changing," ABC News Financial Consultant Melody Hobson said. "It's going to save consumers a lot of money."

Also, a practice known as Universal Default is dead. This means if a person is late making payments on one card, creditors can no longer raise a borrower's rates across the board.

The law also puts an end to double cycle billing, meaning banks can no longer charge interest retroactively if a consumer has paid their bill

Finally, consumers will no longer see credit card companies pitching their cards to college students. That practice has been booted off campus.

The Backlash

Although these changes are intended to benefit consumers, banks have been fighting back by raising rates and fees ahead of the changes.

Consumer advocate Ed Mierwinski he explained that Congress gave credit card companies more than six months to get ready for the new laws, enough time to start gouging consumers with new tricks and traps.

"Some consumers have seen their interest rate, before the new law takes effect rise to 79.9 percent," Mierzwinski said. "Others have seen their minimum payment double. Others have seen all kinds of changes to the rules of their card."

For instance, when several of Rich Santoro's tenants lost their jobs because of the economy, he fell behind on his credit card payment. In response, his card company immediately lowered his credit limit and raised his interest rate.

"It isn't like I've had runaway spending, gambling debt or I've been making inappropriate expenditures," the landlord said. "This is the regular cost of doing business."

Financial experts say one drawback to the new rules is that it will be tougher to get credit in an already tight market.

"I went to my bank and tried to get a low interest rate and they said with the regulations and restrictions they wouldn't allow me to get one unless I had a co-signer," he said. "I haven't had a co-signer in 20 years."

The Takeaway - Proceed with Caution

"Consumers are going to have to shop around. You've got to be careful when you shop around," Mierwinski said.

Consequently, some consumers do take drastic measures.

"I just closed my accounts, got me some money and now I'm on my way, but weird," one woman said.

Santoro said, "You've just got to get rid of your credit cards and just go back to working with cash again."

With all of the new changes to the credit card laws, consumers should remember to be aware of what they can and cannot afford and make better choices in the long run.

*Original broadcast February 15, 2010.

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Charlene  Aaron

Charlene Aaron

CBN News Reporter

Charlene Aaron serves as a general assignment reporter and helps anchor for the CBN News Channel.  Follow her on Twitter @CharNews and "like" her at Facebook.com/CharleneIsraelCBNNews.