The Federal Reserve today issued sweeping new rules to protect Americans from sudden hikes in interest rates on credit cards.
The new rules, which take effect on Feb. 22, generally bar rate increases during the first year after an account is opened. After the first year, companies must provide customers with a 45-day notice before bumping up rates.
Some credit card companies have pushed through rate increases ahead of the new rules. So check your account to see if that happened to you.
The new rules also will ban – increasing the rate on existing credit card balances. For instance, if a customer is behind more than 60 days on a payment, the rate on the existing balance can be boosted.
Credit card companies also will be required to obtain a customer’s consent before charging fees on transactions that exceed their credit limits and will forbid companies from issuing credit cards to people under the age of 21 unless they or a parent or other co-signer have the ability to make the required payments.
Payments will be applied to highest interest-rate balances first, helping customers pay off their balances faster and more cheaply. And, due dates will be the same every month, eliminating confusing cut-off times for payments.
The Federal Reserve wrote the rules to carry out provisions of legislation passed by Congress and signed into law by President Obama last year. Other provisions of that law are slated to go into effect later this year.