Do the new credit card rules go far enough?

Paying off your credit card bill just got a little bit easier. Maybe.

On January 1, 2010 a series of new rules will take effect that force banks to clarify payment details on your credit card statement and provide a standard grace period to pay off your plastic.

Under these rules, credit card companies must also give you advance notice of interest rate increases, stop credit limit increases without your consent, and limit debt collection practices.

But you'll have to wait until next September before the biggest change kicks in, when banks must give you a mandatory minimum 21-day interest-free grace period on all new credit card purchases when the outstanding balance is paid in full.

Interest rates and fees still high

Critics of the credit card regulations say the changes do little to help consumers.

"Skyrocketing high interest rates and the growing number of superfluous fees are the biggest hindrances for consumers," said New Democrat MP and consumer protection critic Glenn Thibeault in a statement. "If the government wants to protect Canadian credit card users, it must go all the way and implement substantial regulations that would put a cap on interest rates and eliminate many of the excessive fees that consumers are being charged."

Thibeault proposes that capping credit card rates at five per cent above prime would help "Canadians who are stuck paying interest rates as high as 25%" and would provide better protection from gouging, giving real relief.

Your new statement

Expect your credit card statement to look different in the new year when lenders must add a summary box that describes all fees and shows you how long it would take to fully repay the balance if you only make a minimum payment every month.

For example, under the new rules a summary box may show that a $5,000 credit card balance at an 18% interest rate would take 11 years and two months to pay off if you only make minimum payments. The total interest paid is about $2,873 and the total tab is $7,873.

But you don't have to wait for these new changes to see how interest rates and minimum payments bust your budget. Check out this Credit Card Calculator to get the facts today and see how many years it will take to payoff your balance. Results may shock you.

For more information on the changes coming to your credit card, see the regulations in the Canada Gazette.

Your thoughts

Do you think the new credit card rules go far enough? What would you like to see done differently by lenders?

Comments

[tony]

I feel very strongly that all lenders should pay back the creditor the interest they stole from them.
My reasoning is this, if i borrow 1000.00 i sould pay back 1000.00 and not another cent. because i did not borrow anymore than 1000.00. Also no company should be bail out with Tax payers Money, where are all those Millons they make before they the mismanagement begins?
I strongly believe wrongs don't go unpunish. God sees every evil and every deceit and reward the Lovers of money accordingly. Remember the Zacchaeus story? Lenders are like the tax collectors in Jesus' days on the earth. Make no mistake they will pay for taking more then their should in this life time and also in the judgement of God .Guarantee !!!

[suck it up]

When applying for credit everyone knows the rates and fees.
They are clearly stated on the application and should not come as a surprise when you receive your statement.

If you don't have it don't spend it,...it is that simple!!!!!

[Naomi]

When it comes to credit card use and fees, consumers need to remember that it is a case of 'Caveat Emptor' - Buyer Beware! As a consumer, when we use a credit card for purchases, we are purchasing the lending instute's services, so I would recommend we shop around no different than if we were buying a car, a pair of shoes or hamburger. Get the best deal possible. Remember that banks are NOT your friend ... they just LOVE the colour of your money. How many billions of dollars did they make last year?? Hmmmm ... and how many of us got a raise or were able to keep our jobs in this recessionary economy?? Unfortunately, the ones who pay the exhorbatant interest fees are the ones who can least afford to - they are our middle class working poor. Totally legal and so unethical.

[Aida]

I agree totally with Glenn Thibeault, NDP MP, finance critic. The banks' high interest rates are outrageous. I fully understand they are in business to make a profit but how do they expect common people to pay back when the interest charges are so extreme. I think lowering the rates will reduce the number of people to file for personal bankruptcy and, therefore, the banks will be able to recoup losses.

[fred shinkle]

reply to Posted by: K Khan | 10/06/2009 at 05:16 AM
you must have a good job mr kahn or won the lottery, not everyone is as luckey as you are to have the huge incomes and job to support the things in life folks have to bear due to illness, handicap etc etc. Sound like you have been blessed by God, monetary wise , but are lacking in compassion and understanding of other human beings that have no alternative but to borrow, not everyone is making the 100,000 a year salary so they can pay for unforeseen things that might happen in the future.
Banks are what I call legalized thieves they alter contracts in a subliminal and almost sinister way that people get trapped by using the card especially in an emergency. Banks and card companies need to lay out the Charges and terms in a simple way, Also they need to reduce those rates to half of what they charge, this also applies to Oil and gas companies21%-28%, and retailers 22-29%, Banks 12-19% seems strange when they can borrow from the Bank of Canada at .25% and also They only pay the depositor.25% they are all userus rates and then to top it all off they have hidden fees. they are way out of line and are not doing much for serving people based on the fees they charge. I remember when you went to a bank and got real service now its for standing in line and waiting and when you use their mechanical tellers you pay a fee that is outragous. Just legal rip off thats all the bank system is so that those on top can write themselves a big bonus check after the annual shareholders meetings are over. BANKING is way to FAT ON FEES AND hidden CHARGES a complete revision of that system needs to be done.

[Diane Roof]

People are responsable for their debts; it seems
to me that going after Credit Card Companies who
in the business of making money which is a given
Right, and then some organizations go after them
from their own self-interests. This is a Free Country
and we are all free to make money.

If you cannot pay your bills, then don't get a card!

Suck it UP!

[Fred]

Sorry they are a illegal license to print monay at super high rates when they can borrow for the BofCanada at .25% and they charge 19-28% on the cards they are legal thiefs. I believe that 1/2 of those rates would sufficient. The sneaky way they introduce services is just amazing and the government and the reugaltors just sit on their hands and do nothing. almost worst then the crime era of the Mafia and the shakedowns of merchants in the 1920-30-40 Legal Thiefs.

[john]

To Responsible

I doubt they make much of the fee the charge the retailer as that covers the cost of processing the transaction and what do mean hefty fees to use the card. Are you referring to the $10 a month you pay to enjoy the points, product protection, rental insurance etc? You used the money and paid nothing for its use because you were able to pay it at the end of the month. If there was no grace period more people would think twice about using a credit card, but then that wouldn’t work for the card companies. They are in the business of loaning money for profit so they do everything they can to get people into the position of paying. There is nothing wrong with making a fair profit but you can hardly call the rates and penalties they apply fair.

[Normal Girl]

I was reading some of the comments where many people think that customers should get a discount when paying cash for their purchases... The funny thing is that instead of that, many businesses offer a discount when paying with a particular credit card such as a store credit card, on what they call a customer appreciation basis... So not only do they make money by attracting more customers with a discount, but they also make more money from having their own credit card, not to mention how high the interest rates often are on such credit cards, as high as 29 percent! How ironic is that?

[Responsible]

Responding to John's comment about people who pay off their credit card balances monthly, who are you kidding? Banks make money from these people also, they charge hefty fees for the use of the card, they receive fees from vendors to name just two. There could be more.

[John]

Not everyone is reckless with credit cards and sometimes you just get stuck. How does it make any sense to raise interest rates and stack on fees which is going to force you into default? For those of who are so money wise that have funds to pay off your balance in full, you ought to be charged a fee each month. You use their money for a month and they get nothing from you for doing so they pass those costs for others to bear. Credit card companies lure people into using their cards by all kinds of means in the hope that you will not pay the balance at the end of the month. You would think that if anything those with the good credit ratings would actually be lousy for the card companies. For those who feel that companies should be allowed to charge what they feel, I take it you just happily pay all those bills that you are stuck paying.

[Auria]

I was offered my first credit card at 19 and I want to thank MBNA for taking that chance on me as a student.

Sure I got into debt. I also got hit by a drunk driver in the middle of the night and when I couldn't even get emergency EI to help me through until settlement 5 YEARS LATER!!!!!!!!! Guess who helped me to live. Ya them....the ones who would let me make such a small min on such a large debt.

I payed them first and when I came out of the hardest time in my life. I have the highest credit rating out of anyone I know! Including people that have had credit their entire lives!

That said,

The goverment needs to step in and cap it period. No one should be paying 25% interest on anything! It is highway robberly and it does no one good! And I had to teach myself how to make the system work for me! The schools should have Basic Finances 101 tought in grades 11 and 12. Everyone should know about compound interest and how to read a financial statement and that if they put 20% from every pay, 10% to RRSP and 10% to save for themselves that they have a hope of being 40 and able to live a balanced life.

[Credit cards for bad credit]

thanks for sharing this great post!

[Robert]

People, its about YOUR SPENDING HABITS FIRST!!

If you have no source of income then do not use your credit cards.

Theres something childish about adults demanding government agencys for bailouts that would not be required if YOU curbed YOUR spending habits.

You spent more money then you could afford to pay off easily....

well then you tighten your belt and get to paying that bottom line down.

Dont go crying to the bloody nanny state to fix the mistakes you made, take responsibility for your own actions and PAY OFF YOUR DEBTS!!!

And before you start flaming that I am some upperclass....

I am a 31 y/o man- the sole provider for my family ,

I work 55 hrs a week and support my wife and toddler son!!

I have been saving for the past 2 years to afford a car.

I refuse to ask for nanny state legislation to pick up after me!!

If you cannot be responsible enough to have a credit card DO NOT GET ONE!!

[carol]

I heard that some years ago when banks interest rates were high and credit card rates were lower, the credit card companies went boohooing to the powers that could change things and ask that they have a chance to make more money and got a temporary (I was told this by my loan officer)order to increase their interest rates. Well they did and have continued ever since. With prime being low like its is now the credit card companies should be lowering their rates to prime plus 2, 3, 4, 5..... In a world that is spinning so out of debt control all should be willing to make the proper adjustments when a crisis is at hand.

[Silver]

Personally there should be a cap on the interest a bank can charge for interest. I work in a remote region,ended up having to stay on a job longer than anticipated, missed paying my bills one month. The credit card company jacked my rate an additional 14% because payment didn't get received on time. Called them, rules are rules they said...read the fine print of your contract. So now I'm at 24% which is robbery/loan sharking in these times. I now can't wait to pay off the card and then never use it again. If the government is to help us people get out of debt, I agree that for a period of time the gov't should instate that the banks charge a small % on top of prime to quicken up the repayment process on existing outstanding credit card debt. It would get us out of the hole quicker and the banks would probably write off a much smaller amount of bad debt. Win win to me!

[Mark]

Hardly a surprize the Fed (which regulates banks) would shoot themselves in the foot by getting 'tough' with the very people lending money. Another way to think of it is with your RRSP plan. Would the government tell the banks to lower interest rates so more people could save? Perhaps with so much debt to creditors, it is no surprize people can not plan to retire.

[Greg]

The problem with credit cards is that in cases where you need to put a security deposit down, you need a credit card. When booking a hotel room for business or pleasure, a credit card is needed. When renting a car, a credit card is needed. In cases like these, cash is no longer KING.

[Mike]

Credit Cards are evil. Everyone pays for the convenience. The retailer pays the customer pays and society pays. The best thing to do with your credit card is burn it.

The next thing to watch out for is your debit card. Check out this link to a series on debit cards on PBS!

http://mikehassard.blogspot.com/2009/09/debit-card-financial-card-game-kelowna.html

[DaveA]

I don't like the way banks work either as a lot of commentors seem to be saying, but we have to get real. They are a business and interest is the way they make their money. People know when they receive credit cards what it is going to cost them. Then when they get into trouble they cry that they are being ripped off. The problem is they don't know how to handle credit. You can't expect to have it all your way. If you can't stand the heat get out of the kitchen.