Does Your Credit Card Statement Have a New Look?

Have you noticed a difference in your credit card statement this month?

It will have a new look as a result of the new disclosure requirements by the Federal Reserve that went into effect February 22, 2010. It will include information on how long it can take to pay off your balance if you make only the minimum monthly payments.

Did you realize that if you’re carrying a $6,000 balance on your credit card account with an 18% APR and 3 percent minimum payment, it can take you 17 years to pay it off when you make only the minimum payment? And that’s only if you make no additional charges.

Suppose that describes your account right now and last night you felt too tired to get dinner so you ordered a pizza delivery. By making only the minimum payment on your credit card, it will take you 17 years to pay off that pizza! After 17 years, where is that pizza? In the meantime, the cost of that pizza, including interest, has nearly doubled!

The purpose of the requirement is to help people understand the consequences of only making minimum payments. Paying off in full each month or at least paying an additional amount toward the balance can save a significant amount of money over time.

A second part of your statement will tell you what amount you would need to pay each month in order to pay off the balance in three years and the amount you would save by making the extra payments. In the previous example, it would require a monthly payment of about $225 to pay it off in three years. While that may be difficult for many people, it would save nearly $4,000 in interest payments.

The third piece of information is the late payment warning. It states the penalty amount of a late payment and how your interest rate may change because of the late payment.

Under the new rules the due date of the payment must remain the same each month. If it is due on the tenth this month, it will always come on the tenth. This helps cardholders avoid the situation of incurring a late fee because they were used to paying on the tenth of the month, for example, and didn’t notice the due date was changed to the first of the month. If the due date falls on a weekend or holiday, it goes to the next business day. The payment cut-off time cannot be earlier than 5 p.m. on the due date.

You can find more information on other changes at http://www.federalreserve.gov/consumerinfo/wyntk_creditcardrules.htm.