Budgeting Tips to Get out of Debt and Build Wealth

Q.  Will the Credit Card Accountability, Responsibility and Disclosure Act make it easier for you to become debt-free?

A. If you don’t have credit cards anymore and don’t intend to get another one, it won’t affect you.  If you are still paying off credit cards, it probably won’t help you, with one exception.

Title I, Sec 104 (4) of the Credit Card Act of 2009 does require credit card companies to allocate any payments made
above the minimum balance to the debt with the highest interest rate first.  This is opposite of what is currently the practice, and would be of some assistance in bringing down the interest-bearing balances more quickly.

The act will prevent interest rate increases for the first year, but after that, they will go up, and the sky’s the limit.  In addition, credit card companies can make their money off of you in other ways, such as implementing annual fees.

Before February 22nd, credit card companies can jack your rates as high as they want to.  According to Wikipedia(1), “Many banks also raised their interest rates in response and raised fees in last-minute attempts to take advantage of their customers before the new laws kicked in.”  That happened to one of the cards we still unfortunately have and will be paying down for some time.

Another little tidbit to be aware of, for you small business owners, is that the act doesn’t apply to business or corporate
credit cards.

The only good thing that may come out of this is that if your credit is already messed up, this will limit the credit card company’s ability to extend credit to you, so you won’t be led into temptation.

In short, the Credit Card Accountability, Responsibility and Disclosure Act is not really going to help.  The best thing to
do is cut up the plastic and pay off those bills as fast as you can.

You can read the text of the Credit Card Act of 2009 at http://maloney.house.gov/documents/financial/h.r.5244billtext.pdf.

(1) http://en.wikipedia.org/wiki/Credit_CARD_Act_of_2009

Posted By: Becoming Debt Free - Paying Debts, Credit Card Companies by Darcy