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

[Gary]

One thing to be aware of is if you are close to your max limit near the billing cycle. What happened to me was I was near it, the company charged the interest which put me over the limit by 2 or 3 cents and then I got charged an over limit fee of $29. I called and got it fixed because I did not put myself over the limit, they did. If I did it to myself then fine I know the rules and pay the fee. I think that's an unfair set up that way because how are we to figure out the interest before our bill when all the rules are different?

[Dawn]

The credit card companies always win. Case in point: I had a Sears card, but was informed several years ago that it would be changed to a Sears Mastercard. Since I have another credit card, on which I earn points, I only used the Sears MC to make Sears catalogue purchases. Well, because I returned some items, I ended up with a $164 credit on my account (I ALWAYS pay off all my credit cards in full). The next time I went into a Sears store, I requested payment of my credit. Nope, that's no longer handled by Sears, but by Chase bank (the issuer of the Sears MC). I was advised to just leave the credit for my next catalogue purchase. Well, I was out of the country for a year, and I hadn't made another purchase for about 14 months. I just got a statement from Sears MC and they had DEBITED my account $25. I phoned and was informed that "they aren't a bank". So, you have a debt and you pay (rightly so), and you have a credit (in essence, they have a debt to you) and you still pay! My biggest beef is that I wasn't informed of this in the weeks prior to the $25 debit ("it's in your credit card agreement"). Like I said, you can't win.

[Bhavik]

If you want a loan get a credit line. I put all of my purchases on my credit card & if I can't pay it all by the due date I pay my card off with my credit line. Credit cards were never designed to carry large balances for years. If you do have a large balance on a credit card & are only making minimal payments talk to your bank close down the card & get a consolidation loan instead.

[Mario]

I have read most of the comments and i find that everyone is entitled to their opinion and each has a point , but to those who would call people whiners and blame them for their situation is not right.If all of us stop to think about how business works we would find that companies employe the expertise of the best psycologists and human behavior experts to find the weaknesses of the human mind and body.These experts know how to get you addicted to almost anything.Lets say for example,tobacco,alcohal,coffee , coca cola ,sugar etc,I think you get the gest of things.These companies know the effects of these products and monopolized on it, glamourizing it on every avanue that was availble to them , tv, magazines, affordability and so on.These CEO's of companies are tyrants with no concience.The remedy(BOYCOT) the product,this will trully change things.

[Harry Green]

My Son went to Calgary in Oct and his hip went into spasm @ 3am swelling to twice normal size. He had been complaining of pain in his hip since an operation 25 yrs ago. Dr's said it was in his head. He had an operation in Jan to remove his hip bones which was unsuccessful and had it redone in Apr. because of the extreme pain he was in. During this time he paid no interest to his RBC Visa.
I took over the account when I realized he could handle both the pain and the pressure. At that time he was 2 payments (88 days) past due. We immediately brought the account up to date, but a week later recieved a letter advising the card was cancelled and the rate had been increased by 6%. They call for $100 minimum payment 92% of which is interest. Not only is this robbery it also shows how callious they can be.

[Michael Decsi]

Hey, Dave.

It's called PUNCTUATION: all those funny little dots and things... you know, the ones you probably use to make little smiley faces and such? :) Try using them sometime.

[Leeann]

Banks and credit card companies are taking big profits; RBC made $632 million just in fees in 2007 & 2008(I use to work for RBC). I became a Sales Rep. and needed a credit card to do business and I was making fairly good money - THEN, it happen a drunk driver hit me, I am now disabled and unable to work(can happen to you or anyone is a flash of a second - life changes because of someone else). Guess what, I am now a low-income worker with a credit card balance; I make my payments but can only pay the minimum balance which 90% is interest.BUT did you know that if you make your payment after 3 p.m. on the last day due, it is considered late and is now a missed payment - come on this is robbery and do this twice they will jack up your interest rate to 24.6%!!!!! Again this is outright robbery. One credit card company charges a fee $53 per year plus I was only $3.00 over limit and they charged me $29.00 over limit fee on top of interest and annual fee - again this is outright robbery. GOVERNMENT MUST go further to stop these credit card companies from highway robbery and look closer at all fees from them and banks. REMEMBER IT WAS THE US BANKS AND INVESTMENT COMPANIES WHO WERE GREEDY AND SENT US INTO THIS RECESSION - these executives are still getting their big salaries while the average hard working person's are paying for it. I am only one example of how life can change in an instant and then a recession hits to boot - it must stop now!!!!!

[Dave]

Now about collections first off it is your right to tell the collection agency that they are to stop Phoning you and to only correspond with you by MAIL if they don't stop you will contact your phone company and charge them with harrasment and that means all communication because they do not have a problem with calling you at work either if they don't stop the phone calls then you can have them charged with Harrasment and I suggest you do so also during the phone call get the persons name(it will likely be false)and the companys phone number what will happen is likely they will end up selling your account to another collection agency who will phone again oh yes and they will get down right nasty when you tell them all future dealing must be by mail only laugh and let them ramble on because you do not have to take their garbage and threats you have rights but they are counting on few people knowing this also they will not Sue unless its a very large amount(there are a few who will)but generally it is not worth it too them so they will harrass you

[Judith]

As noted in the article, it is the 'parasitically' high interest rates that do not match the financial reality of the recession. When Prime is so incredibly low, credit card companies can certainly be likened to carpet-baggers.

The Conservative government can and should address the real problem - immediately.

[Dave]

Well All I can say is that I got a Card when I was young you get it when you don't pay a cent event at Leons/Brick well my advice first off is DON'T DO IT!!!!I lost my Job a Month before it was due and didn't have any money to pay it down it was 2000 bux well interest +ADMIN FEES!!!which are charged every month it racked up a month later I had a descent Job and was determined to pay it off with 300 bux a Month I was on my way right Nope After 10 months or equivilant to 3000 bux my ballance went from 2400down to 2000 original Ballance unbelievable but true they will Rob you blind and not blink about it I now carry a Visa with a very comfortable Credit Limit am older and wiser my interest rate is 11% and my ballance at the end of each month is 0 its a hard lesson learned but it shows that its too easy to be trapped my the fly by night credit people MBNA is one they reel you in with 4.9% offers and the person who said earlier that the interest rate is right there on the contract failed to mention the companies like MBNA hide it in very small writing about 1 onehundredth the size of the 4.9% rope in and in small letters its for a Very limited time very cheeky and sneaky but definately stay away from DON'T PAY A CENT EVENTS if you are not 100% sure you will pay it off on time because they will sink you

[David A]

There are various card options
I have 2 Visas from the same bank. One is at 5-1/2% with no frills.
The other gets 'points' covers car insurance, and has other bells and whistles for 19%
For people who use cards responsably, there are good low-interest options for short-term credit. For those who do NOT manage their funds effectivly, there are higher rate options. Banks (and Dept Stores) set interest rates according to RISK. Cards should be a short-term convenience. Those who carry a max-balance for years on end deserve high rates

[jocylyn]

I rarely use a cc but realize people must, with low wages, families, and high costs,plus unexpecteded illness, job loss etc. I think Melanie's point is defintely very valid, there is no reason for that except greed. But the main thing that should have been done years ago is the capping of interest rates.Why should cc companies have the privilege of setting rates that are unreasonable and get away with it. It is comparable to phone rates when there was only one carrier. That has not been done so the rest won't help.

[Drake]

As with most topics there are several sides to this question. Generally I think that there is not enough education about money & debt. We need to have more ed. in school; the earlier the better.
E.G. is there 'good' debt? Yes there is. If the money borrowed is for an investment that makes more in interest than that charged for the loan! Hard to do that these days, and certainly not with a credit card! So an upper limit on interest rates would help. And ban all that fine print which is a recipe for gouging!
Pesonally I like the credit rating idea - the higher the rating,the lower the interest rate. And there almost certainly should be some flexibility in the Co.'s to accommodate 'good' debtors in the proven event of sickness or unemployment.
But let's face it folks, if the banks etc don't get their profits one way they'll get it another, such as bank fees: & if you're an investor in bank stocks you'll want the profits!!!

[Diane]

I think this is a beginning, however, not enough. What is absolutely necessary is to cap the interest rates. Right now the consumer is at a disadvantage no matter what way you look at it. This needs to change. Carrying a balance is sometimes unavoidable, however if the interest rates were lower, at least it would help.

[Mac Daniel]

We should all try to decrease our credit card usage. Spend a little bit less every week. If we all do that the collective impact will be significant enough to put the pressure on the lenders. I remember 30 years ago credit cards were a sign of wealth. Now the poor have more credit cards than ever. It is a predetory tactic.

[Melanie]

If you don't like the interest rates, don't get a credit card!

[Bert]

There needs to be another provision as follows.
Many credit cards already don't charge you interest if the balance is paid in full within a given time period. However, there is a gray area that needs to be addressed. Suppose your balance is $ 101.58 and you make a mistake and submit only $ 101.53 i.e. a 3 and and 8 look pretty alike. Since you did not pay in full your are now liable for the 18% or more interest payment on the whole balance not just the $ 0.05. There has to be a rule that an error of say up to $ 10.00 can be made without having to pay interest on the whole balance.

[Ticked]

Credit card rates should be regulated by the gov't and rates should be tied to the prime rate charged to the banks. The interest rates on credit cards used to be much lower before everything spiked in the early 80's and mortgage rates rocketed to 25% and Canada Savings Bonds were paying out 18%. Credit card companies followed suit out of necessity to cover their credit committments. Paying high rates seemed in tune as it was within a few points of prime. The problems started when interest rates fell, the companies did not follow suit. Most people I dealt with at the bank paid their balances each month and didn't notice the that the rates remained at their all time high. Also back then not as many people had credit cards and if so only 1. The problem nowadays is that people use thier cards as extended credit rather than a convenient way to pay for items you HAVE money for. Also it is way too easy to obtain a card. We regularly receive "preapproved" credit card applications from companies such as MBNA. In fact we still get apps for my father-in-law who passed in 1979!! Did you know that if you pay your bill in full each month your credit score is NOT as good as some one who makes partial payments! The cr companies don't make money from you! That's why my friend who is a single parent making $10.50/hr managed to rack up $50,000 in credit card debt.(How does anyone get a $20,000 limit on a Sears M/C with an income of $20,000?) The government needs to step in and regulate the rates and how cards are issued. Company shareholders will squawk but they are not the ones who are going to turn our economy around.

[Ticked]

OK I tried to post a lengthy comment but received a messgage stating you could not accept my comment...what gives?

[luisa spedaliere]

remember this. the road to bankruptcy is paved with credit cards