Lawmakers hear the cries for credit-card reform

This article appeared on MarketWatch.com a couple of weeks ago. Before I get into some of the specifics of the Senate Bill as discussed in the article, I'd like to point out some common sense items. If the credit card companies are treating people so poorly, why do we keep using them? Think about it. If you got ripped off by a local store, or received really poor service from a local restaurant, you would stop doing business with the offending entity. Why are credit card companies any different?

I for one, stopped doing business with the credit card companies years ago. So to me, this is a no brainer. To many of you, you just don't know how to function without credit cards. Over time, I will provide you with simply ways to avoid using credit and take back control of your financial lives.

The Senate Bill has some interesting features. And it is these features that seem to be at the crux of the credit problems most people seem to be having. The major restrictions that are being placed on the credit card compies are:

1. Prohibit "universal default," a practice through which issuers use a consumer's history with another creditor to raise interest rates
2. Prohibit "anytime, any reason" hikes in rates
3. Prohibit charging interest on debt that has been repaid
4. Require 45 days of notice before any rate increase
5. Require full disclosure in statements of payment due dates and late-payment penalties
6. Prohibit issuing credit cards to consumers under 21 unless they show they can repay the debt, or complete a certified financial literacy course
7. Limit certain abusive fees and penalties, such as charging interest on credit-card transaction fees, or charging a fee to allow a consumer to pay a credit-card debt

1. Universal default allows the credit card companies to change your rate with as little as 30 days notice for any reason. Most often, you've missed a payment with another vendor, or in the credit card company's view, you became too risky. The problem is, is that when you signed your credit card agreement, you agreed to this. What the bank is really trying to do charge you based on the preceived risk the bank is taking when it extends you credit. Take that away, and the bank will have to do it some other way. They may simply close your account, or drop your credit limit. Either of these actions will negatively impact your credit score. Don't say I didn't warn you.
2. See #1
3. I've never seen this happen, so if someone has please let me know.
4. So instead of getting 30 days notice, you'll now get an extra 2 weeks. Wow...
5. I guess they will be required to add a new box to your statement outlining these items. I'm guessing people were righting Congress complaining that they did not understand their statements.
6. This one I like. I have a college age son, and the amount of banks offering credit cards to college students is simply unbelievable. Here they are extending kids credit who often don't have jobs. I'm guessing that they expect the parents to pay for these debts so their kids won't have a bad FICO score. I've told my kids that I won't be paying any crdit card bills...
7. I guess there will be a list of abusive fees. So I can expect the banks to come up with new fees and charges not prohibbited by law.

Now most people get into credit card trouble when they lose a job. They didn't have an emergency fund or the job loss was for a very long time (6 months or longer). Instead of preparing for an emergency, many people think they will live off credit until they get a new job. Then they realize that they cannot make the payments and pay their normal bills.

Do I like or approve of the shanagans the banks do to sqeeze money out of their customers? Absolutely not! Do I think we need an act of Congress to solve our problems? Absolutely not! You as a consumer always have choices. Choose financial freedom and don't be a slave to a credit card company.