You may recall that I am a big believer in the stupidity of credit cards. As a result I was very pleased to hear about the new credit card laws that recently went into effect. There is a bunch of things that are changed with this new law. I recently read an article on bankrate.com on what they thought were the “8 major benefits,” but they miss one realllly important benefit. Here’s what they include on their list:
- 1. Retroactive rate increases.
- 2. More advance notice of rate hikes.
- 3. Fee restrictions.
- 4. Restricts marketing and issuance to students.
- 5. Ends double-cycle billing.
- 6. Fairer payment allocation.
- 7. More time to pay.
- 8. Gift card protections.
All of this is great. I mean really great. Credit card companies can no longer raise your interest rate if you fail to pay a different card company, they must use any payment beyond the minimum on the highest interest rate item, they must give you 21 days to pay a bill instead of 14. But bankrate AND the several other articles I read on this subject all missed the point. And if you are interested in the nitty-gritty details of the bill, you should check out the FDIC’s page. But the best thing about the new laws can be summarized in my little list:
- 1. Little box that says how long it will take to pay off if you only pay the minimum and how much extra that will cost you.
Chances are you’ve seen your new bills. THEY ARE AMAZING. For example, I recently opened a no-interest credit card to purchase a new laptop for my partner. They informed me in clear English that if I paid the monthly minimum ($11) on my $1,011 purchase, then I would have the laptop paid off in SEVENTEEN years for a total of $3,479. I mean, you and I have known about this problem for years. Minimum payments are just not the way to go for paying down debt. But the thing that really got to me was that I overheard two older maintenance guys talking at the hardware store about that little box. The guy was floored that it was take him so long to pay off his debt. I almost jumped for joy. Non-Math people understand the consequences of their actions with regards to money. woohoo!