Credit cards provide payment options for Canadians and offer valuable benefits for both consumers and retailers, but they’re not perfect.

The Canadian Bankers Association points out that 70 percent of Canadian households pay their credit card balance in full each month and, on average, credit cards account for only three percent of household debt.

The federal government is proposing two new sets of regulations to further protect credit card users and to ensure consumers have access to clear and useful information to assist them in using their credit cards.

The Credit Business Practices Regulations are designed to limit business practices of financial institutions that are not beneficial to consumers.

These include requirements such as a minimum 21-day interest-free grace period on new purchases when the consumer pays the outstanding balance in full. Payments made in excess of the required minimum should use a method that’s beneficial to consumers, such as allocating payments to the balance with the highest interest rate first. We also propose that companies require the consent of consumers when increasing their credit limit.

The proposed regulations would also include implementing uniform rules regarding debt collection practices, such as restricting financial institutions from contacting consumers after 9 p.m. on weekdays and Saturdays, and after 5 p.m. on Sundays. We advocate waiving fees when the credit limit is exceeded solely because a hold was placed on available credit by a hotel or gas station until the transaction could be fully processed.

The second set of regulations amends the existing Cost of Borrowing Regulations to improve disclosure and transparency for consumers.

Credit card companies will be required to publish information such as fees and rates in a summary box on contracts and applications. Information shouldn’t be buried in fine print – it should be presented in clear and simple language.

Companies would also be required to explain to consumers the implications of making only the minimum payment, and give advanced notice when interest rates increase at the end of low introductory rates or skipped payments.

This government supports increasing the financial understanding of all Canadians to encourage them to make informed decisions about their credit card use.

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The audio version of Garry's September 7, 2009 op-ed column can be heard by clicking here