New credit card regulations a big step forward
— Marshal Cohen, chief industry analyst of The NPD Group, Inc., is a nationally-known expert on consumer behavior and the retail industry. The views expressed are his own. —
These new credit card regulations should be viewed as a big step forward… and they are indeed a big step forward for consumers, especially as they are forced to confront the realities of their credit cards.
As these new credit card regulations go into effect, I hope that they will in fact help consumers manage their credit card debt more effectively. Yes, these changes are a step in the right direction, they inform and empower consumers to manage their credit better. But they still don’t replace the importance of ensuring consumers fully understand how credit cards work.
I am continually amazed at how often I learn, during the course of my research with consumers, how few truly understand that paying the minimum payment does not pay off any of their balance. These changes will enable consumers to monitor their account limits more effectively and perhaps force consumers to balance their credit cards as they might a checkbook. (Something, I’m not so sure consumers have really been forced to do, thus far.)
I think that by being forced to confront their credit card balances at point of purchase as well as being given the option to accept a ‘purchase over limit fee’ is critical in getting consumers to be conscious of their spending. Over the decades consumers have used credit cards as if they were invitations to go on shopping sprees without regard to spending limits.
These new regulations will also afford consumers a deeper awareness of bank charges. Advance notice of rates changing and the like will empower the consumer not only be more reactive to changes but proactive, too. Consumers will also have the ability to anticipate changes and seek out new or alternative banks and accounts.
In the past, consumers were made aware only after receiving their statements and in most cases, not made aware of rate changes at all. Frankly, most consumers don’t read the details of their statement and just pay off the minimum amount due without complete understanding of the statement. With these new regulations going into effect, consumers will be made aware ahead of time. This will in turn allow them to take action and take advantage of competitive offers and convert their accounts to another card or bank.
There is still a great deal of education that needs to happen on these regulations, specifically along with an education on the basics of credit card usage, but all-in-all these are important steps for consumers to take and better manage life with credit.
Click here for a list of the new credit card rules.