New regulations came into effect yesterday that the Government of Canada says will protect credit-card holders from unexpected costs and help them make better financial decisions.
"Our government has taken action to make financial products more transparent for consumers," Finance Minister Jim Flaherty said in a statement.
The rules mandate a minimum 21-day interest-free grace period on all new credit card purchases when a customer pays the outstanding balance in full. As well, any customer payments made in excess of the required minimum must either be allocated to the balance with the higher interest rate first or distributed proportionally to each type of balance, such as cash advances or purchases.
Another change is that credit-card issuers must inform consumers on their monthly statement how long it would take to fully repay the balance if only the minimum payment is made every month. For example, a $1,000 balance with an 18% interest rate would take more than 10 years to pay off.
The new rules also require the disclosure of interest-rate increases prior to their taking effect, even if the information had been included in the contract.
Bruce Cran, president of the Consumer Association of Canada, said he agrees with everything in the regulation.
"There is a lot of benefit to the consumer. (The rules) are all things that we have been asking for," he said.
The only concern he has, he said, is that many Canadians aren't aware of the rules because the government hasn't publicized them aggressively enough. He said his organization has been fielding more calls than it can handle from consumers asking about the new changes.
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