Credit Cards.

Those helpful personal finance tools that are causing a lot of headaches will be our topic today. I know I'm a little late to this news story but my feelings on credit cards are mixed and confusing. So lets give this a try.

President Obama signed the Credit Card Accountability, Responsibility and Disclosure Act (or Credit C.A.R.D. Act. You are so cleaver Congress.) into law on May 22, 2009. The new legislation has many rules protecting consumers from "unfair and dishonest" practices. Some changes I agree with and others I find a little too strict.

Good changes:

• Ban double cycle billing
• Allocate at least some of a payment to the highest interest balance.
• Ban universal default.
• 45 day notice of interest rate changes (this seems a tad long but oh well).

Bad changes:

• Limit on "over the limit" fees.
• Prohibit charging over the limit, unless cardholder accepts the transaction.

These are just a few that stand out in my mind. The over the limit protections are a bit far for me. I think if you charge over your limit, you can pay a fee. If you don't watch your finances, you are asking for trouble. I have very little sympathy for those that charge over their, usually ample, credit limits. You should be tracking your personal finances. I've been using credit cards for over 5 years and have yet to pay a single penalty or interest charge. I don't see how people can find themselves in so much trouble. That said, once a person slips, credit card companies don't lend a hand to help them up.

I read over that last paragraph and now think to myself, "Wow Matt, that is a little uncaring of you." I do feel bad for people who get deep into debt. It is very easy to do. But people take the risk when they sign up for credit cards. The Act will likely increase the cost of credit to responsible consumers, due to the loss in revenue from the reforms. I'm not looking forward to paying annual fees, I would probably cancel all but one of my cards. I swing back and forth about this being good or bad. All in all, I hope that it reduces the available credit to non-credit worthy individuals. After all less debt out there wont be a bad thing.

Credit C.A.R.D. Act

Credit Card News Site