April 16, 2010, Newsletter Issue #1: The Credit CARD Act of 2009
Tip of the Week
The Credit CARD Act of 2009 has changed the way balance transfers are handled and may actually reduce the amount of 0 interest balance transfers you see advertised.
Understanding the New Interest Rate Regulations
The Credit CARD Act of 2009 ensures that all introductory rates must be valid for at least 6 months. That means that when a credit card company offers a balance transfer introductory rate of 0%, it must be prepared to honor that rate for at least 6 months.
Understanding Payment Application
One of the ways that credit card companies made money from balance transfers was by charging regular interest on any new purchases you made on the card. They would simply apply your payment every month to the 0 interest rate transferred balance and allow interest to accrue on your new purchases. With the Credit CARD Act of 2009, this practice is forbidden. Payments that exceed the minimum now must be applied to the balance with the highest interest rate now, which means you might not accrue any interest on new charges or the transfer during the introductory rate.
While these regulations certainly make consumer wallets safer, they may result in fewer balance transfer offers.
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