New Year brings new credit card rules

We will soon see credit card reform aimed at increasing transparency for card users. The rules come into effect in the new year but the Finance Department says that it will not implement a mandatory 21-day interest-free grace period until next September.

Starting January 1, credit card issuers will have to provide a ''summary box'' on application forms which details interest rates and fees.

Banks must inform their clients how long it will take to repay their balance if only minimum payments are made each month. Also the banks must give notice of a change in the interest rate. You will also have to approve any increase of your limit as the banks will not be able to do this automatically.

There has not been a declaration by the government as to why the 21-day grace period has been delayed until September. This grace period stops banks from charging interest on all new credit card purchases when the customer pays the balance outstanding in full.

When the reforms were proposed Canada's banks opposed the changes, saying that these changes were costly and unneeded. The banks say that 70% of credit card users pay their bills in full on time.

Most insurance companies will accept credit card payments. Some clients will use a credit card because some give an Air Miles reward. If there is a reduction in charges when the customer pays the outstanding bill in full then it will effectively reduce some of the insurance costs.

There is a new proposed Code of Conduct presented by the the Canadian Federation of Independent Business (CFIB) which includes the following:

  • Ensure more transparency and disclosure of information regarding the cost of transactions
  • Provide proper notice provisions to merchants about contract changes, with the right to exit without penalties
  • Allow issuing premium cards only on request
  • Allow merchants to offer a variety of cash discounts
  • Enable merchants to control how transactions are routed

The government is reviewing this and we are hopeful that many of the recommendations will be implemented.