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New Credit Card Rules for Restricting the Financing of Issuance Fees, Security Deposits

In July 2010 the Credit Card Reform Act will become effective, and this means many changes for both consumers and credit card companies. One of the most notable changes will be the rule that restricts credit card companies from the financing of issuance fees and security deposits. In short, this means that credit card companies will not be allowed to finance charges and fees for opening an account when fees and the total cost of charges is more than half the available limit on the credit card. 

Of course, you may be thinking that this makes no sense because nobody is going to open a new credit card account with such high fees. While this make sense most of the time, you are forgetting about subprime credit cards with high fees for opening an account accompanied by a low credit limit. Some such fees include security deposits, membership fees, and those for joining or simply opening an account.

Additionally, the rule also states that fees charged upon opening cannot exceed more than 25 percent of the credit limit. To go along with this, any amount up to 50 percent should be spread evenly throughout a minimum of the next five billing cycles.

Many consumers will never have to worry about this rule because they won’t get involved with a credit card that has high fees and a low credit limit. But remember, it is important to be aware of all the details governing the Credit Card Reform Act. If you are going to get involved with a subprime or bad credit credit card there is a good chance that this rule will affect you in one way or the next.

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