If you are a baby boomer who is serious about being financially prepared for retirement, there are (in my humble opinion) some very good reasons why you can ignore the new credit card regulatory rules that went into effect on February 22. There are also some important changes to watch for.
1. You won’t carry a balance. Instead, your card balance will be paid in full each billing cycle. This means that you don’t care what the account interest rate is or will be because none of that interest will apply to you. Your card issuer may have increased the nominal interest rate on your card (or made it a variable rate) in anticipation of the new rules, but so what? Let the card companies make their money on the young and irresponsible cardholders, not on you. This also means that you can choose the card with the lowest (or zero) annual fee and best rewards program for you, disregarding the interest rate.
2. You won’t pay late. Because the new rules will make it somewhat harder for the card issuers to raise interest rates in the future, they will find other ways to make money from cardholders, including late fees. You won’t care about late fees because you have automated payment of your credit card balance every month, on time.
3. You won’t overcharge. The credit card companies may lower limits on your cards. You don’t care because you always stay well below your card limit. If your balance is close to your limit at the wrong time, your credit score could be negatively affected. Also under the new rules, the card companies can no longer automatically allow you to charge over the limit and then hit you with over-limit fees. You may opt into continuing this practice, but you won’t, because you won’t need to.
Three things to watch for in the new credit card rules:
1. New Annual Fees. Your bank may try to impose an annual fee on your previously “free” card, to compensate for their inability to make money in other ways. Don’t let them do it. Call and complain. You are a good customer and don’t deserve that treatment. If they persist, find another card. There will be competition for the best customers. That’s you. Let the bank make money from the transaction fees.
2. Sneaky account fees. Many industry watchers are predicting that banks will become more creative in imposing fees, such as a fee for not charging enough each month. Make sure you read everything that is sent to you and that is printed on your statement. Do not let the bank get away with these sneaky fees. Threaten to cancel your card and even move your banking business if necessary. The card-issuing bank makes money every time you swipe your card so don’t fall for any sneaky fees.
3. Lowered credit limits. This is another tactic that a bank might try, even on longstanding accounts. The important task for you is to be aware of it, so that you can be sure to stay well under the limit at all times.
The bottom line is that the new credit card rules were created to help people who carry balances. Those people are not you. You are thinking about and planning for retirement. Consumer debt is incompatible with a successful retirement. Even mortgage debt is a risk. Don’t you agree?