I'm all for making the credit card holder more aware of these fees and regulations. It's not fair of these institutions to hide it in such fine print-leaving the customer to take the blame.
New Credit Card Statements Help You Get Out of Debt
The new laws from the CARD Act have created a number of changes for credit card holders. Teenagers now find it very hard to get a credit card, card companies can’t stick your past balances with a higher interest rate, and new credit card statements make it easier for consumers to see the consequences of their actions. The new statements are something I want to quickly touch on today as most of you should begin seeing something similar hitting your mailboxes this month if you haven’t seen them already.
In the past, credit card statements were not very user friendly. They contained a detailed list of card activity, your balance, minimum payment amount, and the due date. That’s about it. It was then up to you to decide how much to pay, and since most of the time people would see the minimum payment as the amount due, that’s what they paid. Paying the minimum credit card payment is a big mistake. The minimum can literally cost you thousands and take over a decade to get the balance paid off.
Thankfully, the new credit card laws make some important changes to credit card statements that will go a long way in helping people get out of debt. To give you an idea of what you’ll see on the new statements I took a picture of one of our recent card statements:
This is a big box prominently displayed right on the front page of the statement. There’s no way to miss it, and that’s good. There are a few things that make this new box so important. First, it recaps the balance, minimum payment, and the due date right at the top. These are the three most important pieces of information regarding your credit card bill, so it makes sense to highlight them again. But even better is the paragraph just below that, the late payment warning. Here, in very clear terms it tells you exactly what will happen if your payment is late. It tells you how many days you have as a grace period, what the late fee will be, and what will happen to your interest rate. Try getting this information on your old statements! It was impossible because it wasn’t there and you instead had to sift through the fine print of your credit card agreement to find it.
Even better, look at the minimum payment warning. Now instead of making the minimum payment seem like that’s all you should be paying they actually attach a warning to it to hopefully show people how bad of an idea that is. In my case, our balance is $1,600 and if I were to just make the minimum payment each month it would take 13 years to pay it off. That’s right, 13 years! Think about that. If you go out and buy a $1,600 TV and then only make the minimum payment on the card you used the TV will probably have died or gone obsolete years before you’ve ever paid for it.
I like how it also shows you how if you pay a little extra each month you can shave literally a decade off of your repayment and save nearly $1,000 in interest. For this card, the minimum payment right now is $40, so it shows that just by paying $12 more and continuing that payment can yield huge savings. I know at the top it says the minimum payment due is $79, but that’s because I was deliberately late so that I could test some of the new features from the credit card law. I wanted to see if it triggered any additional warnings on the statement and make sure they did not immediately jack up the interest rate, assess fees, etc. So far it looks like everything is working as promised.
Finally, there’s help for those who need it. At the bottom they offer a toll-free number for credit counseling services. In the past, people basically had to see this information out on their own and might not know where to turn. Now, they have a number they can call right on their statement. If they see the numbers and realize they are in over their head, help is just a phone call away.
The New Statements Are a Great Change
If anything good came out of the new credit card laws, it had to be the new statements. No longer are important details hidden within fine print and people don’t have to go and find a credit card payment calculator online just to see how long it will take them to pay off their balance. This information will be right in your face each month, and if seeing that it might take you over a decade and cost thousands to pay off just a small balance doesn’t kick your butt into gear, I don’t think anything will. It will be a while before we begin to see the effects of this statement change, but I’m certain that in the coming years we’re going to see decreasing credit card balances across the board and a group of informed consumers that finally understand how costly credit cards can be.
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Filed Under: Credit Cards
About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.
Kevin, there is no late fee up to 7 days past the due date. That's what I wanted to check and see if they would stick you with a fee the moment you're a day late or if they followed the grace period. I already paid the balance, but I just wanted them to generate a new statement showing up as late to see.
Your penalty APR is only 17.9% on this card? That's pretty nice.
Personally, I don't know if I would be intentionally late and pay them $39 to see what effect it had on the new statements. But it's an interesting idea.