Can The New Credit Card Laws Protect Us From Ourselves?

Monday, June 1, 2009, AM | 3 Comments

The new credit card law may or may not protect us from ourselves. It does not protect us from our freely spending spree. One thing is for sure. In the Western World and Japan and a few other countries, owning a credit card or two, or perhaps ten for some, is almost a must. It is nearly impossible to avoid it entirely.

It has become a swine flue of your finances, a pandemic if you will. Wikipedia defines it an epidemic of infectious disease that spreads through populations across a large region. And that’s what it is. You have it, so I must have it. But many of us have no choice. We have little or no money, student loans and a grim job market. A credit card may be our only option for funding life’s necessities. That means needs, not wants.

The new law takes big steps in protecting credit card users from being taken advantage of by the anacondas swimming freely in the financial swamps built entirely by consumers’ fear, anxiety and misery. It will also protect the younger generation from getting in over their heads in debt, which is a real problem. A recent study conducted by the national student loan provider Sallie Mae shows that only 17% of undergraduate students paid off all their credit card balances each month. In other words, 83% who borrowed money are still in deep shit. But if you rent money for mortgage, education and other such endeavors that might give you a return, then it is a good debt. If you are unable to return it to its owner, it then becomes bad debt. And that’s why I say you are in deep shit, mister.

strappedThe new law can help you only when you want to help yourself. We need to become more responsible. Tamara Draut, author of Strapped: Why America’s 20- and 30-Somethings Can’t Get Ahead, explains that while we may think Americans’ credit card debt is due to frivolous spending, in reality many of us are in debt from necessary purchases like gas or groceries. Credit card companies have made it increasingly more difficult to manage credit.

The new bill sets much more specific guidelines as to what these companies can and cannot do, and how they do it. There are some significant regulations you may appreciate. The “fine print” details will have to be clear and legible so if you do want to read it, you can actually see it.

To protect college students, the new bill limits how much money creditors can even allow those under 21 and without a co-signer to put on their card, which may help limit debt. In most cases, minors will only be allowed to have a credit limit of either 20% of your income or $500.

Like the Surgeon General’s warning on a pack of cigarettes, you would see a warning on the top of every statement telling you that paying only the minimum amount of your balance will increase your interest rate and the time it takes to get you out of debt.

In a Nutshell
The bill will not take affect until 2010. In the meantime, the anacondas will be swimming freely in the credit swamps of consumers’ anxiety, misery and fear, for the next nine months. Until then, pay close attention to your monthly bill statements. If you are under 21 and without a card, you may want to consider doing some credit card research. Your days of practically limitless credit are numbered.

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