Obama: Credit Card Bill of Rights by Memorial Day

President Obama held a town meeting on Thursday in Rio Rancho, New Mexico to discuss his plans for immediate reform of the credit card industry.

"It’s time for strong and reliable protections for our consumers. It’s time for reform that is built on transparency, accountability, and mutual responsibility – values fundamental to the new foundation we seek to build for our economy," President Obama said.

The White House said in a statement, "Americans need a durable and successful flow of credit in our economy, but we can’t tolerate profits that depend upon misleading working families. For too long, credit card contracts have been deceptively complicated, often leading consumers to pay more than they reasonably expect due to unfair practices."

The House passed its version of the bill on April 30 and the Senate is currently working on their version of the bill. Obama hopes to sign the Credit Card Bill of Rights into law by Memorial Day - legislation that bans unfair rate increases and forbids abusive fees and penalties.

Card issuers will be required to use easy-to-understand language in the contracts, provide basic information for easy comparison of credit cards' features so consumers can shop for cards better informed. Also, the government will better monitor the credit card industry for deceptive business tactics and enforce the law with penalties.

But while this is an important step in protecting consumers, it is still up to each individual to take charge of their own credit card use by using their financial common sense. Don't accept a contract you don't understand. Stick to your budget and spending limits, and don't go over your credit limit. Then pay your bill on time every month. A credit card is a great financial tool, but the responsible use of credit is ultimately in the hands of the consumer.

Americans have been dependant on credit cards for years, and it's just plain convenient to swipe a card and pay the bill at the end of the month. But many consumers fail to get that bill paid on time every month - we, as a nation, pay around $15 billion in penalty fees every year.

And to add further to the cost of using credit, many of us don't adequately control our spending and are unable to pay the entire balance each month. Those interest charges are taking a big bite out of our disposable income. The vast majority - 80% - of U.S. households have at least one credit card, and 44% of families carry a balance.

Most consumers are aware that a good credit score will help them get better deals on loans, mortgages, and revolving credit such as credit cards. But those with poor credit scores are likely to find that it will become increasingly difficult to get a credit card at all after these new regulations go into effect.

Card issuers, as evil as we like to perceive them to be, are just businesses operating to make a profit. And if they face restrictions on how they are allowed to control risk, they are likely to bypass taking that risk on consumers who have a poor track record of paying their debts on time. What this means is that for those with bad credit, it may be very difficult to even gain credit until their credit rating improves over time.

Smart consumers know what their getting themselves into before they charge to their credit card, and they won't allow themselves to feel "victimized" by the credit card industry. Sure, sometimes we make mistakes that end up costing us more than we planned, but it is up to us to take responsibility for our own financial decisions - no matter how badly we feel taken advantage of.


Source:
The White House