Canadian consumers will have a minimum 21-day, interest-free grace period on all credit card purchases after the federal government introduced new legislation on Thursday.
This applies when a customer pays the outstanding balance in full.
The new regulations also require credit card companies to let customers know how long it will take to pay off their debt if they only make the minimum monthly payments.
Finance Minister Jim Flaherty said the public’s financial literacy will be increased and admitted the changes were met with some resistance by financial institutions.
“It is a major change. It will cost financial institutions tens of millions of dollars,” Flaherty said.
The regulations also force companies to require express consent for credit limit increases.
Dave Sallay, a 20-year-old warehouse employee, said these rules could have helped him avoid the “huge” credit debt he owes.
“Visa raised my limit from my original $500 to $2,400 without my consent,” he said. “I didn’t want it increased, and if I spent more than my limit they would just let it roll over.”
Sarah Stenabaugh is a graduate student who said she was given a credit card too early.
At 19, she signed up during a promotion that gave her $100 for groceries. After a few months of not watching her spending, Stenabaugh was paying nearly 20 per cent interest on a balance of $5,000 alongside insurance add-ons she claims she didn’t ask for.
“They need to regulate who they give credit cards to,” Stenabaugh said. “They hit up the kids right when they get to university who don’t understand how a credit debt could affect them for years after.”