Wednesday, February 24, 2010

O well!! The credit card act is finally here......

Few important things what I'd suggest checking with your bank.

What is the interest rate increase on your account (from ** to what **).

Will the bank charge if your account is not active. Few banks are charging 19$ on dormant accounts.

3) If they
are charging any Annual fee for accounts with rewards program.

If you are not using the rewards on your accounts, check with the bank and remove the rewards program. This will drop your interest rate by a huge %. One of my cards had a variable APR of 13-17% and after removing the rewards program, the interest rate came down to 5-8%. May be you can keep the rewards active on just 1-2 accounts whichever gives you the best deal.

Opt in/opt out of the over limit fee. If you opt out of this, and if you use your card beyond the credit limit, your card will be declined unlike before where they were charging 39$ for using your card over the credit limit.Also, if the account is linked to any of your other accounts, it does a cash advance.

6) Check for the i
nterest rates on Balance Transfers/Cash advances/Purchases. If you’ve made any cash advance/Balance transfer before, the payments what you made were applicable to the lowest interest rates first.

For example, if you made a balance transfer (with a promo rate of 2.99 and later on it will increase to 24.99 something)

Purchases may stay at 13.99% (your normal purchase APR)

The tricky part is when you pay off the balances on your account. When you pay your monthly dues, it will be used to pay off your purchases balance (with lowest APR) first and then your balance transfer/Cash advance etc (highest APR). This way the banks were getting money for the balances on high interest rates for a longer period.

This has changed now – the payments what you make will be applicable for the highest interest rates first making it easy to avoid paying high interest rates.

7) Going forward, your monthly statement will show the number of years it will take to pay off your balances on your account if you pay only the minimum monthly payments.
Chase has an easy to use tool which calculates this for you.

Disclaimer - These are just my suggestions based off my understanding of the Credit Card Act rules.