Credit cards spent the summer imposing draconian terms and higher interest rates before all of the consumer-friendly rules Congress passed last spring can take effect in February.
But we may be getting our first glimpse of what life under the Credit Card Accountability, Responsibility, and Disclosure Act might really be like — and it’s kind of promising.
Bank of America is introducing a new “Basic Visa” card this fall that features what it calls “simplified rates and terms” and embodies many of the changes Congress — not to mention its customers — seem to want.
The new card will come with a single page, easy-to-read agreement, not the impossible-to-read booklet-sized contract common today.
Lawyers wrote those huge contracts so that customers would have a hard time spotting and understanding many of the abusive practices that will be banned by the new law such as double-cycle billing and universal default.
The new card will also have a single interest rate for all transactions, not different rates for purchases, balance transfers and cash advances.
That rate — prime plus 14.0%, or 17.25% right now — will be a little higher than most cards have charged for purchases, but lower than they’ve charged for cash advances.
The new law forbids credit cards from applying payments only to that portion of a person’s balance that’s charging the lowest rate.
In fact, it requires payments in excess of the minimum to be applied to the credit card balance with the highest interest rate, taking away a major reason for having tiered rates.
Nor will Basic Visa impose a penalty on users who exceed their credit limit.
Under the old way of doing business, credit cards routinely allow customers to go over their credit limit without warning them, and then slap a fee on them.
Under the new law, cards are banned from charging over-the-limit fees unless a cardholder specifically asks the issuer to complete over-limit transactions.
The new card Bank of America card will be available in October.