On May 22nd, 2009 President Obama signed the Credit Card Bill of Rights.  The bill gives credit card companies nine months to change the way they do business.  Credit lenders are going to be forced to post their credit card agreements online and let customers pay their bills online or via telephone without any added fees.  The online agreement is also going to have much more clear and concise statements rather than the fine print Americans used to see in the credit card agreement that came in the mail in the form of a phamplet.

According to a 2006 report, most credit card agreements are written at a high school or above reading level.  Over half of American adults read at an eighth grade level or below.  It seems that many credit card companies are using fine print and deceptive wording to take advantage of credit card users.  The President and legislators feel that credit card companies should provide a level playing field for all Americans who own and use a credit card.

Another important aspect of the credit card bill of rights is to make sure that interest rates are not raised to unusually high rates for financial matters that did not involve that specific credit card.  It has been that case that credit card companies access the late payments you make on other bills to increase your rate before your credit rating is even affected.  Most users understand that their rate will increase as their credit score decreases, but it should not happen beforehand; that could cost you hundreds of dollars a month without even knowing it.

There is no doubt that President Obama is trying to do everything in his power to make sure that corporate America does not take any hard earned money away from common citizens.  The problem that may arise is the fact that corporate America is going to continue to find a way to squeeze money out of taxpayers.  If rates are forced to go lower and credit card companies must adjust their practices it is likely we will start seeing annual fees on every single credit card out there.  Currently there are many credit cards without an annual fee, but I would imagine after this bill goes into affect and credit card companies need to find ways to make money they will definitely increase the annual fees on cards.

Unfortunately legislation could not cap interest rates on credit cards.  This practice would be truly impossible as it would make those who have been smart with their finances suffer.  If the highest a credit card rate could be was 20% then companies would find a way to increase the rates of consumers who had extremely low rates.  To increase revenue from the extremely high rates they are not getting, credit cards would be forced to increase their best customers rates from 2.9% to 3.9% or even higher.  Most people that have rates that low are likely to pay off their monthly balances but the credit card companies would have to take the chance on getting that amount of interest.

Overall, the credit card bill of rights is going to help many credit card holders save a lot of money that they didn’t even realize they were spending.  So many Americans just pay the bill they are presented and never actually do research on the finance charge.  We all have extremely hectic lives and assume the finance charge was calculated correctly and we let it go.  I would imagine many of you have never even contacted your credit card company to find out exactly how the finance charge is calculated.  Is it calculated based on the average amount on the card or the current amount on the card?  Is that amount for this month or the trailing month?   These are questions that many card holders have never asked.

While some of you may say that you do not understand numbers, this is a time when understand numbers is almost essential.  If you let credit card and mortgage lenders continue to nickel and dime you for the rest of your life, you could end up losing over $20,000 over the course of your lifetime just in credit fees and charges.  If you are not good figuring these numbers out, I am sure there is someone in your social network that can help you grind the numbers and figure out if you are getting “ripped off.”

Now that the law has been passed you will have a little bit less of a worry about paying unreasonable rates.  This does not mean that you should start paying a much smaller amount on your credit card.  Just because your rates are not being adjusted higher does not mean that your overall balance is going to decrease; you still have to pay it off!  I have many friends that seem to think when their interest rate declines that means they should also reduce the amount of their monthly payments.  I truly hope that many of you are not making the minimum monthly payment as it will take you FOREVER to pay off the card.

The best way to get the cards paid off is to apply all extra cash to the highest rate card.  Once you have paid that one off work your way to the next highest rate card.  By doing this you will get the higher rates out of the way and you will end up paying a lot less in interest over the course of your lifetime.  Some individuals feel they should pay a certain amount on each card each month.  It is not wise to do this as each card has a different interest rate.  If every single one of your cards has the same interest rate, this would not be a bad decision, but I seriously doubt that will be the case.

Overall, President Obama and his legislation is working very hard to regulate the credit card industry. Today the next step was taken as the credit card bill of rights was signed.  The only true way for you to find out how much money you will save is to sit down and crunch the numbers for your specific circumstances.