Mixed reactions to credit card rules
Geoffrey Blain
Issue date: 6/9/09 Section: Business
Although many people were hoping for a cap on how much interest credit card companies could charge, the new regulations concerning credit cards announced by Finance Minister Jim Flaherty are still significant.
Among the most beneficial changes is that credit card companies must now allow a 21-day grace period before charging interest instead of the common practice of immediately charging interest on purchases if the cardholder had failed to pay their prior balance. This new measure will help offset the snowball effect that begins to occur when credit card users can't pay their full balance.
Although credit card companies will still be able to charge ridiculous interest rates, they will no longer be able to begin accruing that interest immediately. Flaherty defended the decision not to limit rates by reminding Canadians they have a choice of credit card companies.
"[This government] believes in consumer choice. We are not interested, like some parties, in nationalizing banks," Flaherty said. "If someone wants a lower interest rate on a card, then they have choices and they can do that."
Another change credit card holders can expect to see is to the information contained on their monthly statements. Credit card companies will now be required to display information such as how long it would take to pay off their balance if the card holder only made the minimum payment each month.
"A lot of people think if they pay their minimum balance, things are OK," Flaherty said. "But things are not OK. It can take you more than a decade to pay it off [that way] and we just want to make sure people are aware of that."
The new bills will also contain clearly stated information regarding interest rates and grace periods, which were dubbed as "half-measures" by the NDP.
"Increasing the font size on a credit card contract doesn't help Canadian families who are hurting right now," said NDP Member of Parliament Glenn Thibeault.
However, Flaherty argued that increased knowledge and awareness of how credit cards work will go a long way towards helping Canadians shape their financial future, "but only if they are equipped properly to do so".
Among the most beneficial changes is that credit card companies must now allow a 21-day grace period before charging interest instead of the common practice of immediately charging interest on purchases if the cardholder had failed to pay their prior balance. This new measure will help offset the snowball effect that begins to occur when credit card users can't pay their full balance.
Although credit card companies will still be able to charge ridiculous interest rates, they will no longer be able to begin accruing that interest immediately. Flaherty defended the decision not to limit rates by reminding Canadians they have a choice of credit card companies.
"[This government] believes in consumer choice. We are not interested, like some parties, in nationalizing banks," Flaherty said. "If someone wants a lower interest rate on a card, then they have choices and they can do that."
Another change credit card holders can expect to see is to the information contained on their monthly statements. Credit card companies will now be required to display information such as how long it would take to pay off their balance if the card holder only made the minimum payment each month.
"A lot of people think if they pay their minimum balance, things are OK," Flaherty said. "But things are not OK. It can take you more than a decade to pay it off [that way] and we just want to make sure people are aware of that."
The new bills will also contain clearly stated information regarding interest rates and grace periods, which were dubbed as "half-measures" by the NDP.
"Increasing the font size on a credit card contract doesn't help Canadian families who are hurting right now," said NDP Member of Parliament Glenn Thibeault.
However, Flaherty argued that increased knowledge and awareness of how credit cards work will go a long way towards helping Canadians shape their financial future, "but only if they are equipped properly to do so".
Be the first to comment on this story