Helping you get your head around new credit card rules

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I’VE got a credit card bill that’s taking me forever to pay off. I’ve heard there are new rules regarding credit card accounts, can you tell me what these rules are?

A) New changes to give consumers more control over their credit card accounts came into effect in January 2011. The six main changes are:

1) The most expensive debt will always be paid off first. Before, most credit card companies used your repayments to pay off your cheapest debt first. This meant you paid interest on the more expensive debt, such as cash withdrawals, over a longer period of time.

2) On new accounts, the minimum payment will reduce the outstanding balance. For new accounts opened from 1 April 2011, credit card companies must set the minimum payment at a rate that reduces your actual balance by 1 er cent each month. Before, if you made the minimum payment, this would generally only cover fees and interest charges and wouldn’t reduce your outstanding balance.

3) No credit card cheques unless requested. Before, credit card companies could send you cheques that you could use to withdraw money against your account. Now you will only be sent these cheques if you ask for them.

4) More choice and control over credit limit increases. Before, your credit card company could increase your credit limit without asking you. Now, they have to contact you if they want to increase your credit limit. You will have 30 days to decide whether to accept the increase. This gives people more control over their spending.

5) Clearer communications about interest rate increases. Before, if credit card companies increased your interest rate and you chose not to accept it, your account would be closed and the outstanding balance repaid at the existing rate over a reasonable period of time. Now, once your credit card company has contacted you, you will have 60 days to decide whether to reject the new rate. This means you will have more time to explore alternative deals.

6) More flexibility about how much you pay towards your bill. Before, if you wanted to set up a regular payment you would have had to pay either the outstanding balance, or the minimum payment each month. Now you can choose to repay any amount you want between the minimum and the full balance.

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