So today February 22, 2010 the new rules for credit cards went into effect. What does this mean for you? Well in general the new rules help to protect customers better and should help you to pay down your debts even faster.

1. No New Rates On Old Debts

The credit card companies cannot raise the interest rates on existing debts that you racked up before the new rules pass. This means that your rate will stay the same or go down if you get lucky, as long as you pay on time. The exception to this rule is that if your payment is more than 60 days late they CAN raise the rate.

Lesson: Pay on time EVERY time.

2. No Lowest Interest Payments First

The credit card company must apply payments in the order of highest interest rate first. This means if you have one balance of $500 at 2% interest and another balance of $650 at 21% interest then the payment is applied to the $650 first, because it has the highest interest rate. This means you will be paying off the higher interest debt first,which is one way to work a debt snowball payoff.

Lesson: The more you pay the more you save.

3. No More Universal Default

In the past, if you paid late on your Discover card then Chase (just for example) could raise your interest rates, and so could Capital One. This was called Universal default and meant you were messed up all across the board. With the new credit card rules this can no longer happen. The only card that can raise your rates as a result of you being late is the card that you were late on.

Lesson: Do not pay late.

4. No More Automatic Over Limit Fees

In the past most credit cards would allow you to over the limit but would charge a fee and higher interest rate for the ‘convenience’ of allowing your purchases to go through. Now you have to opt in, in WRITING to the card company to let them know if you want this. Of course it now means that your card will be declined if you try to go over the limit.

Lesson: Do not go over your limit.

5. Detailed Bills And Debt Payoff Estimates

Now the credit card companies need to provide you with more details about how long it will take to pay off your debt. This includes a section that details how many months it will take to pay off the card if you only pay the minimum amount and how much interest you will end up paying.

Lesson: Pay more now to save more later.

6. No More Kiddie Credit Cards

Children under the age of 21 will no longer be allowed to open credit cards in their name unless they have one of the following:
proof of income or
an adult cosigner

This is a way to protect the youth from racking up too much under the belief that someone else will take the full responsibility. If the child has to show income he or she may think twice and if you have to cosign for the card then you are more likely to teach careful spending habits because their actions will affect your credit score.

Lesson: Teach your young ones good credit habits from an early age.

I think that in general the new rules will help a lot of people find ways to save money, mainly because of the savings in the interest payments over the years. I plan on being credit card debt free in 2010 so I will not have to worry about these changes for much longer.