On January 1st, the Canadian government implemented new credit card regulations, which it says increase transparency and protect consumers. Here are some of the new regulations now in place:
• Credit contracts and application forms must have a "summary box" that clearly explains interest rates, fees, and how long it would take to fully repay a balance if only minimum monthly payments are made.
• Banks must give advance disclosure of interest rate increases, even if this information is already in the credit contract.
• You must give your consent before your credit limit can be increased.
• If you transfer your balance to a lower-interest card, your payments now have to be allocated in your favour.
• There’s now a limit on certain debt collection practices used by financial institutions.
• Banks can’t charge over-the-limit fees resulting from holds placed by merchants.
• One of the most significant changes has been delayed until September 1st. As of that date, you’ll have a minimum 21-day interest-free grace period on all new purchases if you pay your outstanding balance in full by the due date.
Critics of the new rules say they don’t go far enough. However, at least the government is trying to make an effort to help consumers avoid predatory lending practices. And that’s a good thing.
However, an even better strategy is to start weaning yourself off of credit card debt. Unlike taking out a mortgage to buy a home or revenue property, buying stuff with your credit card at high interest rates doesn’t yield any returns—it simply gets you deeper in debt. Instead of making the minimum monthly payment, put yourself on a budget, take a part-time job (or start a home business) and eventually get your credit cards paid off. You’ll be astonished how much extra money you’ll have to invest in assets that actually appreciate in value and put cash in your pocket!
