What the new credit card rules mean

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Earlier this month, three new regulations came into effect promising to protect Canadians who use credit cards. But while these new guidelines are a positive step forward, many fear that they could lead to a rise in rates, and that they simply don't go far enough to curb consumers' poor credit habits.

CreditCards.com asked Laurie Campbell, executive director of Credit Canada, a not-for-profit credit counselling organization, to chime in on what today's new credit card rules mean for cardholders:

CreditCards.com: How do Canadians stand to benefit from the nation's new credit card regulations, which include a minimum 21-day grace period during which they won't have to pay interest on new purchases, and statements that show how long it will take to pay off a balance if only minimum payments are made?

Laurie Campbell: The regulations will help Canadians see their debt more clearly and be aware of the impact of only making minimum payments.  Having this visual entity on their statements will give people pause for thought on the total cost of credit card borrowing in relation to only making minimum payments.

Another change is that grace periods will be universal at 21 days. This is helpful in ensuring that people have adequate time to make payments. A third change is that payments will be applied to all products, not just the lowest interest product, which has meant consumers pay more in interest.

CreditCards.com: How might these changes impact interest rates? Is there a chance they'll be raised?

Campbell: I do not believe interest rates will increase at this time; I believe there would be a backlash if that happened. And it would be very difficult to justify in this low interest rate environment we are in.

CreditCards.com: What sort of product changes should we expect in the credit card market?

Campbell: I do not believe we will see significant changes in the way creditors operate. These are changes that [issuers] feel they must comply with and cannot make any changes that will negatively impact consumers. 

CreditCards.com: How might these new regulations improve consumers' poor credit card habits?

Campbell: Education is always valuable for consumers and having clarity around credit cards is important.  These new regulations will help to a certain degree but more education on financial habits, literacy and credit is needed.

CreditCards.com: Do these regulations go far enough? What else might you like to see happen?

Campbell: It is a great start.  Again, more education is definitely necessary. One way to help consumers is to increase minimum payment amounts which can be as low as 3 percent, if not lower.  By increasing these amounts, consumers will pay less interest over time. 

Published September 17, 2010

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