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

[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.

[Witt Mueller]

The name credit card is a missnomer: it should be "Purchase-card". I have a credit card with the "Super-store" and collect points wherever I use this card. As a rule I receive about $30.- discount on my monthly grocery shopping, sometimes more. That is besides the free turkey three times a year and the discount at the gas pump.
I do pay off my balance every month and therefore do "NOT PAY ANY INTEREST AT ALL !"
If I need to make a larger and / or unexcpected purchase I have a credit line with TD Canada Trust at one percent over prime.
One more thing, I live within my means, work only partime and manage just fine.

CHEERS !
WITT !

PS: The fact that I am single, semi-retired, have no outstanding bills, no dependance, a very small mortgage, receive only a Government pension (hence the partime job....) may make a differance.

[Pam]

My husband and I got into a stupid situation where we were always getting limit increases. Well, at first it was all well and good and we weren't holding any balances. Then, work dropped off for my husband and the cards got used more and payed less. We were just making the minimum payment and getting farther and farther behind. Finally enough was enough. We tried to negotiate lower interest etc but no one wanted to help us. In fact ,one thing that really boggles me is, if you struggle to make a minimum payment, credit companies raise the interest rate, charge phenomenal fees, etc. My beef is, if you can't pay the minimum as it stands, how do they expect you to pay even more fees etc. They set you up for failure.
Well, we fixed that situation and went on a debt relief plan. Best thing we have ever done. Credit cards will be paid in full in less than 4 years and most are not charging interest, We pay one amount to the Credit Counselor and they deal with the Credit card companies.
The thing is, your credit goes to an R7 for the time you are on the DMP but once all debt is paid in full, your credit goes back to as if you never had any credit ever. You get a clean slate to start again. Personally, I will NEVER have another credit card ever unless it is a prepaid one. We have learned to live strictly on a cash basis and life is so much easier. I would highly recommend credit counseling to anyone having difficulty.

[Neez]

Consumers should be encouraged to reduce spending by paying cash. They should be offered a discount when paying cash since merchants would not be required to pay the credit card companies any merchant fees. Quite a few people I know use credit cards only because it makes no difference whether one buys merchandise/products/services on credit or cash. Such people also use credit cards only to buy time to pay, but always pay the statement balance in full. Very few merchants have a surcharge on credit card purchases. While it is necessary to have certain mandated rules to protect the consumer, we also need to give consumers incentive if making purchase with cash.

[John]

High credit limit cards are a liability.

The new cards with a chip in them also came with a change in liability.

Under the old system the banks and not you were liable for unauthorized use......NOW with the cards with a chip in them you are liable for unauthorized use not the banks.
It may seem like a simple change but now the liability is on you to fix up any mistakes and I suggest the banks will be content to collect interest and fee charges rather than assist with helping you.

The game changed so you should play according to the new rules. Maybe consider lowering your credit limit/liability exposure. Maybe consider reporting your card "compromized" (stolen) and resetting passwords on a regular basis. This is particularily essential as so much information is sent electronically or over the internet.

It is necessary to realize the financial system has changed so electronic transfers are neccessary and reverting to cash has serious limitations.....BUT one must protect themselves and limit your liability.

Pereonally I think restricting yourself to a prepaid card with no credit limit/liability might be a wize choice for many. It is kind of like back to cash only with electrinic transfers. The possibilities of air miles and cashback etc are potential sources of benefit to you IF and only IF you know and play the game according to the rules set out by the banks.

Suit yourself OR shoot yourself.

[kitjam]

First off it may seem like the bank gets a lot from the merchant fees, but most of these fees go to pay the intercharge fee that is requested from MC international, Visa international, and Amex. Where consumers may be helped is in the interest rates, this is where the bank is making their money. What I do not understand since I have spent most of life working for a credit card division in the bank, is why when the bank of canada decreases the interest rate is this not reflected in the rates we pay on all our debt, credit cards, loans and mtg. This should be decrease automatically when the prime changes, and I think 5% over prime is too much 3% over prime is what we should be charged on ALL DEBT.

[Anna]

Credit card companies have a monopoly on the credit market. Commercial vendors are charged increasing higher rates for allowing consumers to use credit cards for purchases. These rates vary depending on the specific card (ie rates charged to vendor are higher on money back cards). Rates vary between vendors depending on volume and average transaction size. Visa and Mastercard have consumers and vendors in their pocket and need some regulation. In the US, 7-Eleven stores are trying to get government regulation on these fees. When there is a monopoly, you need regulation. When there is more competition, the market regulates price.

[Keith Rodgers]

Credit cards are the most profitable part of a banks product range. We still have them charging 19%-25% even when the prime interest rate is so low. It needs regulation to force the banks to charge no more than say 5% above prime.
Credit cards are a venus fly trap, you land on them use them and then the trap springs. It would take ages to pay off the balance what with interest and them changing the rules every 5 mins.Bets thing is not to have them in the first place,say no when the bank pushes them down your throat. Only way the banks can claw the cash back lost is to keep charging these insane interest rates.
People are getting caught in the rabbit snares.

[Darin]

This new bill does absolutely nothing for the average Canadian citizen with credit cards.... It truly is nothing more than a joke. The only people it helps are those who missed paying of their balance by a few days and are now stuck with a interest charge. Another regulation to help the rich! Bravo Mr. Harper, bravo! Make sure you give yourself a good bonus for that one!

[just a consumer]

what became of the the fees the retailers have to pay to the banks for accepting credit cards? And why is there no discount for paying with cash or cheque??

[CB]

I like the credit card i have. it has the lowest interest rate you can get on any credit card. you should always shop around before making a decision on a credit card. don't apply for the first card you can think of. if you want something cheap then it pays to look around. the new rules don't effect me at all. sure it will show me on my statement how long it will take me to pay off the balance if i pay the minimum payment but i really don't care cause i always pay above the minimum anyway.

[Paul H]

I agree with the majority of the comments, but I personally feel that it is the parents job to teach your kids that credit is something to be treasured and not abused. Yes, banks are happy to send a 19 year old a CC and encourage them to spend it all! It is a business that is very profitable to them. There was a time when we used our cards to live, due to bad times, and carried a balance. Once we were able, we paid it off and do every month since. So, if you can't afford to pay it off at month end, you can't afford it. Banks don't give out $2000 or $3000 loans anymore, they just give you a CC. Only way we can change it is to take charge of our own life and live within our means. I can't agree with the people who want to blame the banks because they have no self control.
Come on people! It is your life, take charge of it and think before you NEED IT right now.

[Opal]

I would like to know when Banks started to control us. They can only make these huge profits by using our money which we give to them willingly for next to no reembursement and by us using their high price services, which we seem to feel we can not live without. You do have control if you refuse credit cards when they are offered and you can refuse to pay those high rates. Deal with them as you would a car dealer. If you don't get the terms you want, walk away. I also suggest that more of you turn to Credit Unions for your banking needs. At least you get paid for doing business with them.

[Dave]

Hey Michael

I didn't know that grammer was being check next time I'll be sure to make all the dots you like geese its a Blog so bite me

[Stan]

I keep all my reciepts and check them off the statement that way tou know what your balance should be. I have my balance withdrew on the due date which is hassle free

[jlyne]

If the credit card companies wanted to be fair then the existing credit card rate at the time of purchase should not be changed to a higher amount if not paid off, The government has done little to help those in a financial bine. Credit cards rates went from highest 18% to 29%. If they wanted consumer spending on track why would they facilitate the additional money spent, be paid in interest to credit card companies. How is that going to stimulate the economy. How does forcing people into bankruptcy with higher interest rates help.

[Janice]

I have an understanding with my credit cards and that is If I can't pay off the balance by the end of the month then I don't get it or charge it. As far as I am concerned there should no need to charge what you can't afford. The generation of today wants everything now.Set aside money out of the paycheck for emergencies like appliances etc. that need replacing.If you like charging then don't complain when you have to pay high interest rates. Thats the bottom line. Sorry but that's life.

[ken]

people don't have to pay those high card rates at all,you can negotiate rates on their card,I did and if I kept a balance,I would pay 9.11%.It's like buying a car,do a little wheelin and dealin and you can get a much lower rate

[Frances Robertson]

I have a friend who is on government disability (ODSP). A couple of years ago she was sent a letter from the Royal Bank offering her a $10,000 line of credit. She has banked in the same bank for years and all that is deposited in her account is her ODSP cheque. Having suffered a couple of strokes some years back she is capable of understanding what this was but not able to realize the repercussions. She did not have to go through an interview at the bank and was granted the line of credit - all she had to do was sign her name. She bought a high priced electric wheel chair, a new bed, etc. etc. When she finally came to me, she had been enduring all kinds of calls from credit companies, some very nasty and very crude. There was no way that she could ever pay this money back and I took her for an interview so that she could declare bankruptcy. There was at least one other person in her building who took advantage of this deal? I cannot believe that the bank would send the letter to her in the first place. Is there no checking done concerning the client's ability to pay? This situation angered me so much and I wonder how many others got "the letter".

[Jason]

The only thing I can say is it hard today with all the bills people have accumalated and with the way jobs are...However my father always taught me if you cant' afford wait until you can...Yes I have a credit card or two and only use when necessary so when the bill does come in I am in a position to pay it off in full....My job is secure at this time but if it I was to be layed off then I would only have the regular bills that come with owning a house and no need to worry about the credit cards...

People just remember if you really don't need it then don't buy it, unless of course you pay cash..