Last spring, federal legislation revamped the way that credit card companies can operate.  The first changes will take place on February 22, 2010. This space is too small to explain the entire legislation at once  but I can explain three components today.

1. Effective February 22, 2010, your credit card company must allocate your payments to the highest interest rate first. If you look at your credit card statement, you may notice multiple finance charge calculations.  The cash advance interest rate is usually the highest, followed by your rate for purchases, followed by a lower promotional rate. Currently, your payments will go to the balance in the category with the lowest interest rate first.  This meant that you would always pay the highest interest rate possible for as long as your bill was not paid in full. With the new legislation, cash advances would be paid before low-interest promotional rate balances.

2. Remember those bills that you get after you thought that you made the last payment? The charge was for finance charges up to the day that you made the payment in the previous month.  That is over! The only reasons the company can calculate an additional finance charge and send an extra bill are for an adjustment due to a disputed purchase or for a payment that was returned for insufficient funds.

3. Your credit card must have the same due date each month.This should make it easier for you to budget.  You should have the credit card bill at least 21 days before the due date. If the due date is on the weekend, you have until the next business day to be credited for on-time payment without penalty. If your creditor changes the payment address, it cannot charge late fees for 60 days.

If you are paying a credit card with multiple rates, your payments should be more effective in reducing your debt. You also will not see that surprise bill after you make your final payment. You will know when your payment is due. You may have already received information regarding specific changes in the mail from your creditors. Look for more information on this important legislation in this blog.