Gift card rules kick in next week
The new rules improve the chances that you'll get more value from the card before it expires or inactivity fees eat up the balance.
Sheryl Harris of The Plain Dealer in Cleveland has some good advice: If you're planning to buy a gift card, wait until Sunday, Aug. 22.
That's when new federal gift card rules take effect, along with the final protections for credit card customers that were included in the Credit CARD Act and phased in over time since the bill was signed into law last year.
Here's what's in store: Post continues after video.
- Gift cards bought Sunday or later can't expire for five years, and that five years restarts whenever more money is loaded on the card. Some exceptions apply, so read the fine print.
- Fees can't be charged for nonuse of the card unless you fail to use it at all within 12 months. Then, a fee can be charged only once a month. There's no limit on the size of that fee, so that's another thing to consider when you buy a gift card.
By the way, don't expect to see these new rules disclosed on all gift cards until Jan. 31, 2011. Companies asked Congress to delay disclosure on some cards so 100 million gift cards already on hand wouldn't have to be thrown away.
Another piece of advice from Harris in Cleveland: "Also keep in mind, the rules affect only gift cards. They don't apply to other types of prepaid cards, including reloadable cards intended for use as checking account substitutes."
More credit card rules also kick in on Aug. 22, in addition to the ones you've likely already noticed (including that now-mandatory eye-popping graphic on your credit card bill that shows how long it will take to retire your balance if you pay only the minimum due).
Among the new credit card rules:
- A late fee cannot be more than your minimum payment, and can't exceed $25 unless you've paid late twice within six months. Then the penalty can be no more than $35.
However, card companies can still ding you in other ways, according to Curtis Arnold, the founder of CardRatings.com. "A missed or late payment can make your (rewards) points vanish into thin air -- depending on the small print on your terms and conditions," he wrote at The Huffington Post.
- Only one fee can be charged for any single violation of your credit card agreement. Consumers Union explains, "For example, you cannot be charged both a late fee and a returned payment fee based on a single botched payment."
- The card company can't charge an inactivity fee (but can still close an inactive account -- which could ding your credit score).
- If your card company increases your interest rate, it has to tell you why.
- Any rate increases after Jan. 1, 2009, must be reviewed within six months by the card company and, in certain cases, reduced. The Associated Press explains: "If the factors that prompted the hike are no longer applicable, the rate must be lowered." However, it adds:
Banks also have some wiggle room in the factors they use to conduct reviews. They can either base a review on the original reason for the rate hike, such as market conditions. Or they can determine whether the rate is in line with their current interest rates for new customers.
We'll see how well that rule works out. Check back six months from now. That rule also doesn't apply when a low promotional rate ends or to variable-rate cards, which your card likely is.
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