Pros and Cons of the Credit Cardholders' Bill of Rights

Like it or not, credit card industry has certain notorious practices that lead thousands of cardholders to serious problems, including heavy debts, enormous interest charges, not to mention penalty fees, and others. If you have ever experienced that, then you will probably support another reform in credit card industry. The Credit Cardholders' Bill of Rights got its 101 sponsor, meaning that 334 members are still to make their choice. Probably, a great number of consumers would love to see this bill become a law. However, it's still not clear what consequences this bill may have. Though this bill proposes reforms that really matter for consumers, the implications of this credit legislation may be promising, as well as frightening.

Now that US economy is still weak, many consumers rely on their credit cards that allow paying quickly for groceries, gas, and clothes. Moreover, plastics are really helpful for those who have lost their job or people who need immediate medical treatment.

From this point of view, the Credit Cardholders' Bill of Rights is just what the doctor ordered for US consumers who need additional protection from arbitrary interest hikes, and other abusive credit practices.

According to Rep. Carolyn Maloney, D-N.Y., when we sign up a credit card agreement, as consumers we have no power to make decisions. The only party that does dictate credit rules is a card issuer. People deserve more bargaining power when it comes to credit cards, and hopefully, they'll get it.

Now let's have a closer look at the most proposed credit card legislation. First and foremost, it protects cardholders from arbitrary interest rate hikes. It will force creditors to provide 45 days notice of any rate increase. It also bans double-cycle billing, excessive credit fees, like over-the-limit fees. All the more so, this bill requires lenders to mail credit card bills at least 25 days before the due date, compared with 14 days as it's currently required.

Credit card companies oppose this bill, explaining that a cardholder who's unhappy about his/her credit rates can easily cancel the card and go to the other issuer. The American Bankers Association also opposes this legislation, their argument is that this bill may have unintended consequences, as credit companies will not be able to price cardholders in accordance with their risk. In other words, creditors will have to charge everyone more, as they will not be able to estimate customers by risk.

Now it's still too early to speak about possible consequences of this bill, about the winners and losers. However, this bill highlights the issues that do matter for every cardholder. Even if you have an excellent credit history, you are not protected from sky-high interest rates and over-the-limit fees. Now that we face a downturn in the economy, credit cardholders need to be protected from excessive fees and arbitrary interest increases.

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