Money: New Credit Card Rules Put Power In your Hands
You may have already been approached to apply for a credit card by someone in a store, at a sporting event or a financial institution. Or maybe you received an application in the mail.
You may have noticed that there are literally hundreds of different kinds of cards available – some offer low fees, others low interest rates, others different rewards or rebates.
How do you find the card that best meets your needs? What information should you be looking for before you sign on the dotted line? The Financial Consumer Agency of Canada (FCAC) has an online Credit Card selector tool that allows you to quickly and easily compare credit cards. Once you’ve made your choice and are ready to apply, review the application since rates or features may have changed. Credit card applications now contain more information, thanks to regulations introduced by the federal government that came into force in 2010. The new regulations also apply to credit card statements and the way outstanding balances can be collected.
- Here are some highlights of the new regulations that came into effect September 1, 2010:
Minimum 21-day grace period: In the past if you didn’t pay your monthly credit card balance in full, you may have been charged interest on that balance and on any new purchases charged to your card. Under the new regulations, there is a minimum 21-day grace period on new purchases made with credit cards. That means you don’t have to pay any interest on new purchases for 21 days if you pay your balance in full for the current month. You have the benefit of the grace period on new purchases even if you are carrying a balance from the previous month.
- Changes to the allocation of repayment: Credit cards often charge different interest rates for purchases, cash advances and balance transfers. The new regulations state that, when you pay more than the minimum required, the credit card company must apply the additional amount of your payment either in equal amounts to all outstanding expenses or to the balance with the highest interest rate and any remaining amounts from highest to lowest rates.
- Only pay the minimum? Here’s what it will cost: Credit card statements will have to state how long it will take to pay off your outstanding balance if you only make the minimum monthly payment.
- A little warning, please: Credit card issuers must give you advance warning of any changes in interest rates, such as when your low introductory rate is about to expire.
Other new regulations came into force in January 2010:
- Less fine print, so you can see the costs: Credit card contracts and applications must include information boxes that clearly state fees and interest rates, making it easier to understand costs and compare different cards.
- You can say “no” to more credit: Credit card companies must ask you before raising your credit limit, to allow you to decide if more credit is a good idea for you.
- Joint borrowers must be told: If you apply for a credit card or loan jointly with others, the financial institution must provide disclosure information to each individual involved unless the other borrowers waive this right. This is to ensure that all parties are aware of the borrowing details of the loan so there are no surprises later.
- No more fees due to merchant holds: Certain merchants, such as hotels, gas stations and car rental companies, place holds on credit cards because they may not be aware of the amount of the transaction for some time. Once they learn the final amount, they typically release the hold. The consequence of a temporary hold is that it reduces the credit available to consumers, who then could unknowingly go over their credit card limit and incur fees. Under the new regulations, financial institutions can't charge you for going over your credit limit because of a temporary hold placed on your credit card by a merchant.
- Clear regulations for debt collection: The new regulations now set out new rules that federally regulated financial institutions must follow regarding how and when payment for unpaid credit card balances can be sought.
Knowledge truly is power. These new regulations will help Canadians better understand their credit cards so they can use them wisely, at the lowest cost.
To get more information on the new credit card regulations visit the FCAC website at fcac-acfc.gc.ca or call us toll free at 1-866-461-3222. The Financial Consumer Agency of Canada is a federal government agency that protects consumers’ rights and provides useful and objective information about financial products and services.
The FCAC is a federal goverment agency that protects consumers' rights and provides consumers with information about financial products and services.