New rules proposed by federal regulators promise to provide relief for the millions of Americans who carry approximately $850 billion in credit card debt. These changes include:
- Longer notification: Credit card issuers have squeezed the time between when the bill is mailed and the due date, in order to trigger late payment fees and interest rate hikes. The new rules say the bill must be mailed at least 21 days before the due date.
- Single-cycle billing: For years, many banks have based interest charges on the average daily balance over two billing cycles. The Fed would trim that back to one billing cycle.
- Fairness in applying split interest payments: When a borrower carries a balance with different interest rates, such as a zero percent promotional balance and higher purchase rate, many banks apply a payment to the lower interest balance first. The proposed rules say the payment must be apportioned fairly between the two balances.
- Grace period following due date: Borrowers will be given “a reasonable amount of time” past the due date to make payments without being penalized.
- No more universal default: The Fed says card issuers cannot increase a borrower’s interest rate because the borrower has defaulted with another lender, as is the current practice.
- No more retroactive rate increases: Companies will no longer apply interestrate increases retroactively to pre-existing balances.
- Longer rate increase notification: Borrowers will be informed 45 days prior to a rate increase, instead of the current 15 days.
