Credit Card Reform and Bankers Response

Most of you are aware that the Senate has passed a new bill that restricts unfair credit card practices called “The Credit Card Accountability, Responsibility and Disclosure Act“, which could very well be on Obama’s desk by Memorial Day. This is shortly after the “Credit Cardholders Bill of Rights” that was approved last month.

Now here are some of the cool things that could come from this bill, according to The Simple Dollar:

Existing balances: Issuers cannot retroactively change the rate on an existing balance unless the account is 60 days delinquent.
Payments: A consumer payment above the minimum applies first to the balance with the highest rate. (Before this legislation, banks could apply your payment to the balance with the lowest interest rate first—so your more costly balance just kept racking up interest. Now, payments in excess of the minimum amount owed must first be applied to the balance with the highest interest rate first, and then to remaining balances in descending order.)
Teaser rates: Issuers cannot raise rates for the first year after an account opened. Promotional rates must last at least six months.
Bills: Issuers must send a bill 21 days before the due date.
Over limit: Issuers cannot charge over-limit fees on credit cards unless the consumer has signed up to allow such transactions.
Minors: For consumers under 21 years old, a company must get the signature of a parent or another to take responsibility for the debt, or it must obtain proof that the under-21 consumer can repay credit.
Disclosure: Cardholders must get 45 days notice of change in terms.
Fees: Issuers cannot charge fees to pay by mail, phone, and electronic transfer or online, except for expedited service.
Gift cards: All gift cards must have at least a five-year life.

Some other things it addresses:

Account closings: The Senate bill doesn’t address it, but the House bill requires an issuer give you 30 days notice before it closes your account.
Universal default: Both bills eliminate this practice, which allows a card issuer to raise your rates if it learns that you were late on another card.
Penalty periods: If you are late and your rate goes up, the Senate bill states that if you pay your bill on time for 6 months in a row, you can reclaim the lower rate.

Now I -like- all of these and think they are great for consumers, but it’s going to suck for some consumers who rely heavily on credit cards and being in debt (in which case they have other problems they need to work on anyway). Now if only they would allow consumers to opt-in to overdraft protection instead of forcing it unwillingly :D

The problem comes from bankers supposedly trying to figure out more tricky and dishonest means of making money out of this. According to The Consumerist, some bankers are threatening to “charge interest immediately on a purchase” or “reinstating annual fees” or “removing reward programs”. I think and hope that most of that is just letting off steam, and not actually going to happen. But if it does, I can’t imagine those particular banks are going to keep customers very long.

How does it look for a bank to lash out at its customers when forced to treat customers fairly for a change? Tsk tsk. That’d be a bad move on their part, and I’m actually fairly disgusted that it’s even being brought up as an issue by the bankers, whether they go through with it or not.

I can’t say it really affects me all that much either way, at least it won’t for much longer. Once dad’s debts are paid off I don’t plan to use my credit cards much at all, and if I do the balance will be paid off immediately, in which case the “charging of interest immediately” might be a problem. But I never worry about reward programs, and if they start charging an annual fee, I’ll just switch to a different card.

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The Awesomeness that is Modern Technology and the Great FICO

I check my dad’s bank account balance everyday to make sure stuff is kosher and that he’s not looming overdraft charges. While poking around on his bank’s website this morning I found that they have bank alerts that you can have sent to your cellphone as well as your email. So I went ahead and signed up so I receive emails if the account is below a certain amount, if there are any overdraft charges, when checks clear, etc. I also signed -him- up to get these alerts on his cellphone (soon as the new one gets here), so maybe that’ll help -him- keep track of things better.

They even let you set “quiet times” for when you don’t want to receive these alerts (like while sleeping).

As much as I dislike BB&T, I’m impressed. We’ll see how well they work out.

I also signed up for a 30 day free trial at myFico.com, more specifically their “Score Watch” product. You get 30 days free and then it’s $8.95/month. Not sure if I’m going to keep it, but I at least wanted to try it out. I’ve heard amazing reviews about their products and monitoring systems. They have videos that go over all the goodies you get for each package. I definitely suggest trying them out.

So far I am impressed. A lot of different charts, calculations, and also tips and advice. My credit score is currently 686 with Equifax (remember I was 525 in 2005/2006) which is right smack dab in the center of “Good” credit. In fact, everything about my credit is marked as “Good” currently. From my payment history to my amount of debt to my length of credit history and amount of new credit. It’s all in the “Good” range.

I imagine it would be higher if I didn’t have a delinquent account from 2004 on there. But I suspect that will drop off in 4 years or so, so I’m not too worried about it. It’s not like I have any new purchases I plan to make anytime soon.

In addition to that, I don’t have a very -long- credit history, only an average of 4 years or so (though my oldest account is listed as 9 years old). I also have some credit inquiries listed still from when we bought the house, but those will drop off eventually too (what do they last, a year?).

It also shows me what is -helping- my score. It says I’ve missed no payments in almost 4 years, the amount of credit I am using compared to the amount of credit I have is low, but also consistent (meaning I have recent credit transactions rather than letting my credit stagnate).

My favorite part is the simulated credit section though. They can tell you what your credit -might- be in different scenarios (like if you pay all your bills on time for the next 12 months). It gives you something to aspire to.

All in all it’s very informative. I’m more anxious to see the day-to-day and week-to-week monitoring, so I’ll keep this posted.

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Q1 Credit Report for 2009

I checked my credit report on Sunday since I hadn’t checked it since last spring, though technically I was given a copy from my mortgage lender in September. Regardless there’s been a lot of activity lately with buying the house, the identity theft, etc, so I was curious.

For those of you that don’t know, you can get your free credit report with Experian, Equifax, and TransUnion at annualcreditreport.com. It’s the only place you can get it for free unless your bank offers you the ability to send you your credit report, which I know some do. This doesn’t give you your FICO score, those you have to pay for, but it does give you a list of credit items in your credit history.

I personally suggest checking one of those every 4 months, instead of all 3 at the same time once a year. That way you can keep tabs on your credit throughout the year. A lot can happen in a year, and a lot of damage can be done in a year.

Anyway, I can’t check Equifax until the end of April (my big one), so I decided to check Experian, that way I can check Equifox sometime this summer.

Everything looks kosher, still only one negative item on my account from 2004, which probably won’t drop off till 2014. But I don’t need credit for anything right now, or maybe even ever again I don’t know.

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Ways your Credit Changed this Thursday

The FICO system changed this thursday with a new system to decide how credit-worthy you are. Despite these changes, most of the usual determinations are the same: Variety, Low Balance, Responsibility, and Paying on time.

New System:
1. Spouses and children can improve their credit score by being an authorized user on a credit card account, but that’s it. No more piggybacking off strangers.
2. Debts less than $100 that go to collections will matter less.
3. They will look at the total picture more. A single repossession, for instance, won’t matter as much if everything else looks good.
4. Having less available credit will drag down your score more.
5. Diversity matters more. A mix of healthy auto, personal and student loans would bring up a score.
6. Closing accounts will bring down the score.

Having a mix of accounts will be a bit of a pain because I just paid off my auto loan so I’ll only have credit cards and mortgage to base my score off of eventually.

In addition to the FICO changes, Experian is no longer offering FICO scores at all to consumers as of today, only to credit inquiries from businesses. Lame.

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