Consumers will soon receive their first credit card bill since last week's implementation of the CARD Act and their statement will look very different.
"The new debt information on your credit card statement is one of the best provisions of the CARD Act and it will benefit every cardholder," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.
The most significant change in your statement will be a chart which will clearly show how long it will take and how much you will actually pay should you make just the minimum payment each month. In addition, the chart will display how much you need to pay each billing cycle in order to completely pay off your balance in three years.
Suppose you owe $3,000 and your interest rate is 14.4%. Your statement would show that if you made no additional charges and paid only the minimum payment, it would take almost 11 years to pay off the balance at an estimated cost of $4,745. In addition, it would show that if you wanted to pay off the balance in three years, you would need to pay $103 per month and it would cost an estimated $3,712.
"Consumers will be shocked at how long it takes to pay down a balance and how much interest is actually paid if you are only making the minimum payment. When people see this personal information clearly presented in black and white, it should have a significant impact on getting consumers to pay off their credit card balance in a much more timely manner. Cardholders can't ignore reality when they see the numbers each month on their credit card bill," says Hardekopf.
An example of the minimum payment table can be found on the Federal Reserve website:
Consumers will see several additional changes on their credit card bills:
* Your statement should be much easier to understand. Fees and interest charges should be highlighted and explained in simple language in a legible font size, not buried in the fine print.
* Your statement should give a toll-free number for counseling assistance from legitimate nonprofit organizations. Issuers are required to provide contact information for three organizations that have been approved by the United States Trustee or a bankruptcy administrator to provide credit counseling services in, at the card issuer's option, either the state in which the billing address for the account is located or the state specified by the consumer. The National Foundation of Credit Counseling (NFCC) has added help lines to meet the expected increase in consumer assistance under the governments new regulation.
* Some issuers will give a summary of total fees and interest paid to date during the current billing cycle and year to date.
Not only will your bill look different, but the delivery and due dates may also be different. Pay attention to the due date because it is possible that your due date has changed as a result of the provision that requires at least 21 days notice before your due date. Your due date now has to fall on the same day every month. The payment cut-off time cannot be earlier than
5 p.m. on the due date. If your payment due date falls on a weekend or holiday (when the company does not process payments), you will have until the following business day to pay without penalty.
These statement changes may be limited to or be most effective for those with paper statements. If you have online banking without a paper statement, you will miss these numbers about your debt. You may have to go looking for it in a pdf file instead of it being delivered directly to you. According to a recent AP story, the biggest banks are not putting the minimum payment on the online account summary page. Bank of America, Chase, Citi and others say they are educating customers through mail and email about the new statements. Capital One is using banner ads about the new disclosures when cardholders log on.
"Banks should act in the spirit of the CARD Act and also make the minimum payment information easily available to online accounts," says Hardekopf.