I’ve been following the Credit Cardholders’ Bill of Rights as its snaked its way through the Senate and House.

Now that our Senators have approved their version, I think it’s time to post about what the credit card bill of rights might mean for you and me.

Keep in mind that the two houses of Congress currently have different versions of the bill, but both versions have similar terms.

Proposed Consumer Protections

• Card issuers must wait until a borrower is at least 60 days late on a minimum payment before increasing the interest rate on an existing balance.
• Issuers must give 45 days’ notice before changing any terms of the credit card agreement, including increases to the interest rate and alterations to rewards programs.
• Payments must be applied to the balance with the highest interest rate first (for cardholders with multiple interest rates on a single card).
• Issuers must mail a bill at least 21 days before it’s due. The current limit is 14 days, which gives borrowers less time to allow paychecks to arrive.
• Issuers cannot charge late fees until the due date has passed. Currently, many card companies consider payments received in the afternoon of the due date “late.” Further, if your due date is a Sunday or holiday, payment will be considered on time if it arrives by the next day’s mail.
• Exceeding your credit limit (and paying the accompanying fee) will require you to opt in (rather than occurring automatically if you make a purchase that puts you over).
• Credit cards will be more difficult to obtain for students and those under a certain age (18 in the House bill, 21 in the Senate).
• Limits and expirations on gift cards will be slackened, and vendors of such cards will be required to print and explain their terms more explicitly.

Potential Side Effects of Credit Card Rights

Although these protections are generally considered necessary and long overdue, they may come with certain drawbacks for enthusiastic and responsible credit card users.

Because card issuers will (hopefully) be picking up less revenue from penalties and fees, they’ll need to find ways to cut back their spending.

Some commentators (e.g. New York Times) suggest that certain rewards programs will be scaled back, so that benefits like airline miles and cash-back bonuses will be smaller.

Card issuers will still have incentives to reward big credit card spenders, though, since they’ll earn money from such users in the form of fees companies must pay to accept credit cards.

Stay tuned in–I’ll be posting about this legislation again if/when it passes into law.

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