Legislation improves consumers' credit card rights

Consumers can expect some positive changes when it comes to their credit cards. The first phase of the legislation requires that credit card companies give 45 days notice, up from the 15 days notice that were previously required in advance of a rate change.

Companies must also mail out bills 21 days ahead of time, instead of the current 14 days, to give consumers more time to make payments.

However, the minimum payments required each month can increase at the discretion of the credit card company. The good news for consumers is that the payment cannot be more than twice the previous minimum as a percentage of the total balance owed.

The second phase of legislation will be implemented in February and has the potential to help consumers who are struggling to stay afloat throughout the downturn. Companies will not be able to raise rates on pre-existing balances unless the account is at least 60 days past due. Subsequent to that, if cardholders are not late on their payments for the next six months, the lower rate must be reinstated.

Another consumer protection that advocates have long been pushing for in the finance industry is for consumers to receive notification before exceeding credit limits. The new legislation will require credit card companies to secure customers' permission before changing them a fee for going over their limits.

The changes come at a time when many credit card companies and other financial institutions are suffering losses, and the new legislation has been met with some opposition from the industry. As a result, possible drawbacks could be cuts to credit limits and rewards programs. From a consumer standpoint, however, increased disclosure and improved terms and conditions are likely to benefit most consumers.

--Bridget O'Sullivan