Stricter Canadian Credit Card Regulations in 2010 -- by Veronique Milot

If you plan to make a New Year’s resolution to control your spending habits in 2010, new government regulations for credit card companies will help you keep your promise.

In light of the economic situation, many of us have resolved to better manage our spending, including how we use credit cards. The good news is that regulations recently introduced by the federal government will help Canadians access credit products that are fair and transparent and that benefit the consumer.

What you should know--

Here are some highlights of the new regulations that take effect January 1, 2010:

• Less fine print, so you can see the costs: Now, credit card contracts and applications must include summary boxes up front to explain fees and rates in plain language, making it easier to understand costs and compare different cards.

• You can say “no” to more credit: Credit card companies must now ask you before raising your credit limit, to allow you to decide if more credit is a good idea for you.

• Joint borrowers must be told: If you apply for a credit card or loan jointly with others, the financial institution must provide disclosure information to each individual involved. This is to ensure that all parties are aware of the borrowing details of the loan so there are no surprises later.

• No more fees due to merchant holds: Certain merchants, such as hotels, gas stations and car rental companies, place holds on credit cards because they may not be aware of the amount of the transaction for some time. Once they learn the final amount, they typically release the hold. The consequence of a temporary hold is that it reduces the credit available to consumers, who then could unknowingly go over their credit card limit and incur fees. Under the new regulations, financial institutions can’t charge you for going over your credit limit because of a temporary hold placed on your credit card by a merchant.

• Clear regulations for debt collection: The new regulations now require federally regulated financial institutions to follow federal regulations regarding how and when payment for unpaid credit card balances can be sought.

Additional regulations take effect September 1, 2010 that will further empower consumers:

• Minimum 21-day grace period: Currently, if you don’t pay your monthly credit card balance in full, you may be charged interest on that balance and on any new purchases charged to your card. Under the new regulations, there is a minimum 21-day grace period on new purchases made with credit cards. That means you don’t have to pay any interest on new purchases for 21 days if you pay your balance in full for the current month. You have the benefit of the grace period on new purchases even if you are carrying a balance from the previous month.

• Pay off your most costly debt first: Since credit cards often charge different interest rates for purchases, cash advances and balance transfers, it’s smart to pay down your most expensive debt first. The new regulations state that, when you pay more than the minimum required, the credit card company must apply the overage to your balance using a method that is beneficial to consumers.

• Only pay the minimum? Here’s what it will cost: Credit card statements will have to include a clear example each month to show the financial consequence of only making the monthly minimum payment.

• A little warning, please: Credit card issuers must give you advance warning of any changes in interest rates, such as when your low introductory rate is about to expire.

Knowledge truly is power. These new regulations will help us better understand our credit cards so we can use them wisely, at the lowest cost.


To get more information on new credit card regulations, visit fcac-acfc.gc.ca

Written by:
Veronique Milot