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

[S. Choudhry]

This is just another ploy to delay much needed changes. How can anyone in good conscience defend a govt policy that allows banks to charge 18/19 percent, sometimes ,at a time when prime rates are at historic lows. How does this grace priod help anyone? Those who are aplauding the changes are just trying to fool us. This is no reform. The banks are laughing; look at the killing they r making.

[Growup]

A credit card is necessary for many things (renting a car).There is a thing called a secured credit card. Get one, use it only when 100% necessary, and you won't have a debt to repay. And please, take responsibility for your own actions. That card wasn't forced on you, you took it voluntarily!

[Fred]

A credit card is not a personal loan vehicle. It should not be used as such by ANYONE, no matter what their circumstances.

The proper way to manage credit is to have a loan, ideally collateralised with a low rate and to pay debts from that if the cash is not available.

High interest rates on credit cards and foolish consumers who elect to carry balances because they spend more money than they ought to without doing ay financial planning allows me to profit from cash rebates offered by my card issuers. Capping rates will mean that those of us who do pay our bills will lose the perks from having done so.

I am getting tired of the government regulating our lives in accordance with some grand plan to protect those who are too foolish to protect themselves. Everyone is NOT created equal. What ever happened to Caveat Empotor - Let the buyer beware?

People who get scammed because they went to unlicensed financial advisors who promised higher than reasonable returns ought to suffer their own losses . . . no one compensated me what MY broker lost a whack of my money in spite of my gentle requests to get me out of the market.

Quebec dwellers (I hesitate to use the term citizens) will soon have the luxury of paying huge tax increases disguised as electrical rate increases because that provincial government spends money like a drunken sailor - overpaying for everything (and especially shoddily built civil works projects) so that their buddies can get rich.

Hydro Quebec already makes BILLIONS in profit and the consumer is theoretically the owner of the utility.

Now they're talking about billions for unneeded transit expansion - all of the beneficiaries of those improvments COMBINED will never contribute that much money in their lives to government coffers.

The government seems to have it backward . . . those who PAY for government should have a say in it's operation. Not the slugs who steal from it or those who drain it dry without contributing.

In California they are talking about banning certain big screen TVs because they are not energy efficient - only poor people will suffer from that ban - we do NOT need a nanny state. There is already too much regulation in our personal lives.

What we need are fiscally responsible governments who have the balls to cut services and the drive to maintain existing infrastructure BEFORE expanding and buying things that it can't afford.

And we need people to take responsability for their own actions.

[zibute]

Well I have a great suggestion. THe banks are collecting a lot of money on the credit card interest. They are also making huges profits.

Why dont the banks divide the profits among the credit card holders are the end of the year.

There is very little reason a company should have unusually high profits.

Be like a credit union -- at the end of the year you get a bonus based on the amount of interest you have paid for your loan. That way everyone is happy.

[Steve]

People, please don't confuse credit cards with personal loans. Many of you seem to believe this is free money or some special entitlement you have. If you are broke, you are broke. End of story. If you have no money, don't borrow from anyone and suggest that your situation is their problem. Interest rates can be whatever the companies choose to make them and that is the nature of business. If you don't like the rates, don't borrow. The whining about rates makes me laugh.

[Zoe]

In response to Robert. Stop pontificating! You are in no position to judge others when you have no idea what their circumstances are. Hmmm lets see...did they lose their job? get injured on the job? get laid off? suddenly take sick? Have a sick child? It makes me ill to read your responses. If you are able to pay off your Cc's in full - good for you, but the majority of people are not so fortunate. There's the high interest rate issue but also the additional fees like charges added on by the Cc company if you have not paid off your balance. Who can win on that one! The average joe has been squeezed dry! I agree with Dennis that the maximum interest should never exceed 10%. What really burns my butt is when banks/Cc companies solicite students to get credit cards. What a way to start out in the world. Vera, keep your head up. It sounds like you have come a long way :)

[Cheryl]

I agree that interest rates are rediculous on all credit cards. 18-30% when prime is.025% would have been called long sharking in my younger days. 5% above prime is more than generous considering that they only will give you 1-1.5% on your investments.

[Christine]

I find it quite surprising that some people here are supporting the credit card companies. Sure, it's each persons responsibility to pay off the debt owed, but wouldn't you prefer having the interest decreased significantly? I don't think most realize just how much interest they're paying in the long run on a credit card at 24%.

I can not wait for this credit reform. It's about time the government steps in and helps us out. Canadians are drowning in debt!

[ahs_terix]

In the old country you pay cash or safe till you have the money. 1967 when i came to Canada you need credit. what for. if i buy a house, fine. for a car i save. for everything else i save. now cant get gas in BC with out credit card . bummer

[Donna]

I understand some folks need to have a credit card and some folks can handle it. There are others who grew up without one, do not have the skills to handle the card and I think this group should have a cap for interest. It is like the card companies are preying on this lot. Those who have the money can pay it off in 21 days, others will not be able to. I personally have cut up all my cards as I am tired of paying large amounts back to the companies. I have also started to not give business such as hotels etc my business where I must have a credit card to book etc. I think the business world has some responsiblilty to accept here, as the card is promoted as being secure, only way to travel, book airlines etc. What did the world do when we had no credit cards? I remember in the 50's and onward, we survived very well with cash. I say let's go back to cash, we then would have less bankruptcy claims etc. The public pays for the mistakes not the companies who are losing. Each and everyone of us does. So why are we promoting credit cards, they are very easy to get when you are young. The banks almost beg the young ones to take a card.

[Gordon of Thailand]

Well this is going to be interesting on my Card.. It shows a minimum payment of 0$ on a balance of 4,000+$..
Go figure guess it will take me a while to pay this balance off... My father will roll over in his grave but I agree with the NDP MP Glenn Thibeault, there should be a cap on interest rates BUT based on your credit rating, the better your credit rating the lower the rate.. I have a perfect credit rating and 0$ in debt but my RBC Premium credit card carries an interest rate of 19.5% GO figure..Best advice I can give is PAY YOUR CARD OFF EACH MONTH and save a small fortune..

[J&J]

ull the plug on all credit card. Credit card are another ponzi scheme. Old days are good days, you can afford it don't think of buying it. at for the comment made by robert "Dont go crying to the bloody nanny state to fix the mistakes you made, take responsibility for your own actions and PAY OFF YOUR DAMN DEBTS!! " You can tell he is a bottom feeder collection agency"

Well they are in the business of lending money for profit the same goes to them lender you gamble you lose. The only people you should pay are those people who are your friend that do not charge any interest for lending money to me they are more important than those corporate ponzi credit card and lending institution.

[Victor]

Even if you pay off a total amount, on or before the due date and the card is not active (no purchases), the bank sends a statement 14 days later, claiming interest. It would be nice if everyone in business could charge interest on a zero balance.

[K Khan]

I agree with Richard, however Jubbi makes an excellent point. The basic use of a credit card is so simple, yet so many are in debt due to their own stupidity!!! As Jubbi says,"What u can't afford, don't buy it!!!", and yet as I stated earlier so many stupid people in debt!!!
Folks u don't need to put cell phone bill pymnts, on ur credit card or other unecessary pymnt options on ur credit card and then go on to 'shop 'till u drop', only to realise at the end of the month on when ur pymnt is due u just can not affrod it!!! Be wise and think before u buy!!!!!!!!!

[Robert]

Cmon, ladies and gentlemen, Credit cards are OUR responsibility to pay off,

I know when I 1st received mine ALL the usurous interest rates were clearly marked on the application.

Its a unfortunate evil, but one we have to live with.

Its called personal responsibilty, you play....you pay.

Prending you are a innocent victim is just bull.

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!!!

[Doug]

The article does not make it entirely clear but recently the grace period for credit cards were changed. No longer did you get an automatic grace period if you carried a balance. One had to "earn back" the grace period by paying off your balance in full, two months in a row. Now are we back to the way things used to be?
The banks snuck this change in without many noticing. Did you?

[Jamie]

But, Bill, 'airmiles' are the second most contested item in a divorce. How would we replace that title?
(Children 'n Pets are equal at 1st!!!!!!!)

[bill]

You think the banks are scaming the average cardholder. Policital party members holding office use credit cards regularly for daily \ monthly or any other so called acceptable expenses. The debt on those cards are paid by the taxpayer. Rarely are they paid on time so guess who pitches in and pays the interest. On the other side of the coin guess who ends up collecting Air Miles or other card user benifits. Why would our politicians want to correct a injustice inflicted on the average citizen when his pockets are being lined and hes able to enjoy paid vacations on the public. Wise up people

[Jamie]

I am so glad jubbi is comfortable to take advantage of others. It is the 'ability' of the SOCIOPATH to find 'glee' in taking advantage of others. As, the only way to receive $150/yr. is to get it from someone else and to think it is from the 'company' is infantile.
To take advantage of the disadvantaged (due to any circumstances) is the definition of cruelty and an inexcusable.
I hope jubbi never gets the 'short end of the stick', although it sounds like jubbi has never made a mistkae except when 'he' thought 'he' was wrong!

[Dennis Welt]

Credit cards maximum interest should be taking care
of by Parliament once more, and should never exceed 10% .