No law can substitute for credit discipline

Credit card users with money smarts and discipline can protect themselves better than any legislation can.

Initial provisions of the federal Credit Card Accountability, Responsibility and Disclosure Act took effect in August. They require banks to give cardholders longer notice before increasing the interest rates on their plastic. And cardholders can opt out as long as they stop making charges and pay the balance under existing rates within five years.

That’s all good, of course. But card users who pay their bills in full never have to worry about interest rates. And if you arrange to pay your credit card statement automatically from your checking account, payments will never be late.

The new legislation also gives cardholders an extra week between the time they get their bills and the due date. Credit card issuers now must mail monthly statements at least 21 days before payment is due. Previously, it was 14 days. But that doesn’t mean it’s time to relax.

“Don’t look at this as an extra week to wait and pay your bill,” said Bill Hardekopf, chief executive of LowCards.com, a website where consumers can compare features of more than 1,000 cards.

“Keep your regular payment schedule and be appreciative for the extra cushion to make sure your issuer receives it on time.”

Having your monthly balance automatically paid on the due date through an electronic transfer from your checking account works particularly well if you travel frequently. Of course, you must make sure to keep enough money in your bank account to pay the bill.

If you are saddled with a balance and are paying interest, the new law gives you more time to do something about it. Issuers must give 45 days’ notice instead of 15 before raising rates. That gives cardholders time to pay off the balance or shop around for another card.

“The extra month of notification is good for consumers, but it is still our responsibility to notice these changes,” Hardekopf said. “Pay attention to your bill inserts, e-mail notifications or the plain white envelopes in your mail,” which is how most issuers will notify you.

Your best bet when you’re paying interest on a credit card is to cut out nonessential expenditures and pay off the balance.

“Let’s say I make $10 an hour, and I buy a leather jacket for $400. Therefore, I just spent 40 hours of my life for that leather jacket,” said Michael Mihalik, author of “Debt Is Slavery: And 9 Other Things I Wish My Dad Had Taught Me About Money,” published in 2007 by October Mist Publishing.

“If I think of the price of the leather jacket to be 40 hours of my life instead of $400,” he said, “I’d definitely think twice about the purchase.”

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Humberto Cruz writes for Tribune Media Services.