Every now and then, governments implement useful new regulations. It was the case when Tobacco companies were required to put health risk warnings on all their products and advertisements and here is another one which has been long overdue IMHO. The Federal Reserve's new rules for credit card companies mean greater protections for consumers. On their Website, the Federal Reserve lists some key changes you should expect from your credit card company beginning on February 22, 2010.
There are various new rules which all make sense in terms of limiting the shark-like behaviour of some of the more notorious credit card companies. Perhaps the most important part in terms of a financial literacy aspect are the new rules for late payments and minimum payments.
Have you looked at your credit card statement recently? The first page should now look something like this:
The prominent displays of late payment and minimum payment warnings should provide some deterrent credit hungry consumers.
As an exercise, hopefully creating some form of an “aha” effect with your kids, use the example given to show the difference of paying something today versus delaying payment. A perfect example of teaching the time value of money. You could go over several different credit card statements to emphasize the impact of compound interest over time. For older kids, take out the calculators and run through the calculations. Have fun with it!
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