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How does the Obama Banking Bill Affect Consumers?

In what has been called “the most sweeping changes to the credit card industry in 40 years” by USA Today, President Obama has passed a new banking bill that curtails what banks can charge consumers. Obama hopes that this bill will help to level the playing field in debt by forcing banks to give up unfair practices that keep consumers in debt for much of their lives. “Just as we demand credit card users to act responsibly, we demand that credit card companies act responsibly too,” said Obama at the signing of the bill, making clear his pro-consumer stance on debt. So, how will the new bill affect consumers like you?

How Does It Affect Credit Card Holders?

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Many consumers are pleased with the new bill because it means less fees and lower interest rates for credit card holders. CBS News reports that under the new laws, credit card companies cannot raise a customer’s interest rate unless they are 60 days behind on their payments. However if the customer makes consistent payments at or above the minimum for six straight months, the credit card company is required lower it back down to the original rate.

Credit card companies are also now prohibited from assessing a late fee for payments processed late by the company themselves. USA Today states that if the bank is late in crediting the payment (which may have been held up in the mail), no fees will be appear on the customer’s statement.

How Does It Affect Debit Card Holders?

The Huffington Post reports the new bill frees debit card holders from the extortionate overdraft fees triggered by spending more than you have. The law now requires bankers to opt in to the overdraft program if they want, but many are choosing to let their card be declined if they have insufficient funds. New customers are no longer added to overdraft protection automatically, and those who are have protection but never asked for it are required to be removed.

What About Young Consumers?

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President Obama’s new bill also protects young people from the high-interest, free credit card offers that often land college-age young adults in long-term debt. Companies cannot grant anyone under the age of 21 a credit card unless they can provide proof of their ability to pay, or have a parental cosigner. This provision was made in hopes of keeping teenagers who might not understand money-management away from the financial dangers that consumer debt can bring. If young people can stay away from credit cards during their college years, they can start their adult lives debt-free, putting them in a better position to consider a home and other important financial obligations.

Summing Up

  • Banks can no longer raise interest rates suddenly and without cause.
  • Consumers will no longer be charged late fees for payments posted late.
  • Overdraft fees will only apply to those who ask for overdraft protection.
  • Young people under 21 cannot be given a credit card without parental permission or proof of strong ability to pay.

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