New Credit Card Law

Congress recently passed the Credit Card Accountability, Responsibility and Disclosure Act (Credit CARD Act... cute, huh?). Here are some of the highlights.

• Companies required to mail statements at least 21 days before the payment is due.
• The payment due date is required to stay the same each month.
• Credit Card companies will be required to show how long it will take to pay off your balance making only the minimum payment. *I think this is a great change. Too many people don't realize the impact of small payments with high interest. Too bad they don't show how much total interest you would end up paying.
• You can no longer be charged an over-the-limit fee for transactions that exceed your credit limit unless you sign an agreement saying that you specifically want to allow transactions that will exceed your limit.
• Payments in excess of the minimum amount will be required to pay off balances with the highest interest rates first.
• Companies won't be able to increase rates on the existing balances for the most part, but they will be allow to increase the rate on new purchases after the first year. A penalty rate cannot be applied unless you don't make your payments for more than 60 days, and then a 45 day notice is required before the rate change. *I disagree with this provision. I think it is the companies right to fluctuate the rate in response to the market. If you don't want to be subjected to market changes in interest rates, then you shouldn't take out unsecured credit.
• For rate changes on new purchases, 45 days notice will be required. Also, you will have the option to close your account if you disagree with the new rate.

Source: USAA

Thrift Savings Plan Upgrades

In typical government fashion, a tobacco bill is carrying changes to the Thrift Savings Plan.

From the article:

• A Roth 401(k) option, which would let participants
put some or all of their after-tax salary into an account that will
grow without tax liability on future earnings.

• Automatic enrollment of new federal civilian employees.

The Federal Retirement Thrift Investment Board said this will encourage
more young employees to start saving for their retirement as soon as
they begin working for the government and take advantage of matching
funds offered by their agencies.

• A survivor benefit that would allow spouses of deceased TSP participants to maintain TSP accounts.

• A mutual fund option that would allow participants to direct their
TSP funds to private-sector mutual funds. The board would be authorized
to select the mutual funds that would be available to plan
participants.

It’s far from certain that a mutual fund option will become reality.

I think the first three are definitely good improvements to the program. The fourth one I could care less about. It's noncongruent with the Boglehead philosophy. I'm very pleased with their current low-cost index funds. As long as they keep those, I'll still be happy. The bad thing is that people will bite off on these funds, which I think is a mistake.

The original article from the Federal Times can be found here.