In the chaos of the financial industry meltdown, you may have missed the news that a Bill was passed by the House, and now awaits Senate approval.  Dubbed the "Credit Cardholders' Bill of Rights", the law would update the Truth In Lending Act with provisions specifically aimed at curtailing the exploitive practices card issues have developed over the years.  One of the Bill's main sponsors, Carolyn Maloney (D-NY) describes the main provisions of the Bill on her web site, including the following provisions:

-Protects cardholders against arbitrary interest rate increases
-Prevents cardholders who pay on time from being unfairly penalized
-Protects cardholders from due date gimmicks
-Shields cardholders from misleading terms
-Empowers cardholders to set limits on their credit
-Requires card companies to fairly credit and allocate payments
-Prohibits card companies from imposing excessive fees on cardholders
-Prevents card companies from giving subprime credit cards to people who can't afford them
-Requires Congress to provide better oversight of the credit card industry
-Contains NO rate caps, fee setting, or price controls

I have been snared by a number of tactics that will be curtailed by the Bill.  Some examples:

Allocation of payments. An offer on an existing card for low interest check-writing or balance transfer hides in the small print how payments are allocated.  Payments are applied to lowest interest debt first.  Lets say you have a balance of $5,000 at 12% interest on a card, then write a check for $5,000 at 0% interest.  Your payments are applied to the interest on the pre-existing $5,000 debt, then the remainder pays down the 0% interest $5,000 balance.  The original $5,000 debt at 12% interest is not reduced at all until the low interest balance is completely paid off.  The Bill will force companies to make the payment allocation more reasonable, so that an appropriate amount of high interest debt will also be paid down.

Double-cycle billing.  The card I use for everyday purchases (from Chase) gives me miles in a frequent flyer program for every dollar I spend.  I churn a lot of money through this card, and make every attempt pay it off every month.  On those rare occasions that I can't pay it off, it actually takes 2 full cycles to get back to where no fees are charged.  This is because of the double-cycle billing method that calculates an average daily balance subject to finance charges over a 2 month period.  It takes 2 months of paying off the card to get back to where no fees are charged.  The Bill will eliminate this practice.  I really want the miles, so the double-cycle billing makes me doubly certain to pay off this card each month.

Due date gimmicks.  One of my cards (from US Bank) has a due date that floats anywhere from the 11th of the month to the 21st of the month.  At first, I just figured this was due to some quirky computer system that didn't realize humans like a consistent due date.  Over time I came to realize that the likelihood of my paying late greatly increases when the due date moves from month to month.  I'm sure this is a huge fee generation tactic by this issuer.  The Bill will reign in many similar due date gimmicks.

What the Bill does NOT do, is help you manage your spending and pay your bills on time.  You are still personally responsible for disciplined budgeting and for paying your bills on time.  Late fees are not going away, and are really not curtailed by this Bill.

One provision I'm sad to see missing is a requirement to include true APR in the advertising of introductory rates.  I recently wrote about one "0% check-writing offer" I received from Discover with 4 months of 0% interest and a 4% check-writing fee.  That equates to an actual APR of 12%, not 0%.  You probably have noticed banks are required to present a true APR when advertising mortgage rates, like this: "30 Year Fixed, 5.5% (APR 5.78%).

Wouldn't it be reasonable to expect the same from credit card issuers?  Most of us get many offers a week, usually with "0% Interest" prominently displayed on the envelope.  It sure would be nice to get a little truth in advertising to see the actual APR, rather than having to dig through the fine print to calculate the actual APR myself.  It sure would help the average consumer to compare the true cost, without getting hooked by the false promise.

Though I feel the Bill should go further in some areas, I completely support it, and have written my senator to encourage support.  I encourage you to do the same by finding your senators' contact information here.