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New Credit Card Rules Today; What it means for You

If your interest rate has ever increased because you were “late” one time or you were charged a high fee for being over-the-limit on your credit card account – times are changing. On Monday, February 22, 2010, the long awaited Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) goes into effect. As a consumer, this is GREAT news. Below are some of the changes in the law that favorably impact you, the consumer.

  • Late fees – creditors must provide at least 21 days from the date the bill is mailed, for you to pay your bill. In addition, bills cannot be due on weekends or have adjusting due dates (the 17th one month and the 18th the next). 
  • Over- limit fees – before you can make a purchase that exceeds your credit limit, you will have to “opt-in” and authorize receiving an over-limit fee. If you do not, the purchase will not go through. 
  • Interest rates and interest calculations –
    • A creditor cannot increase your interest rates on your current balance due to clauses in agreements such as, “any time, any reason” or “universal default.” The ban also severely restricts retroactive rate increases due to late payment.
    • Interest on promotional rate credit cards must last for a minimum of six months.
    • Payments made that exceed the minimum payment due must be applied to the highest interest rate portion of accounts. So, if you have an account with an interest rate of 23.99% for cash advances and 14.99% for purchases, the excess amount must go to the cash advance balance.
    • The practice of calculating interest for the current month on the previous month’s balance is now prohibited. 
  • Plain language and Clear Information –
    • Contract terms must be in written in clear language and disclosed in such a way that consumers can understand them and effectively manage their finances.
    • Information regarding how long it will take and how much it will cost the consumer to pay off an account, if they only pay the minimum due each month, must be shown on monthly statements.
    • The creditor must also show the payment and interest cost if the consumer were to pay the debt off in 36 months. 
  • Other new rules –
    • Fees on subprime or low-limit credit cards are substantially reduced and regulated. Consumers can no longer be charged numerous fees on the credit card, just for opening the account.
    • Store cards and gift cards – the law limits inactivity fees on cards for the first 12 months it is open.  In addition, any fees for the cards must be clearly disclosed.

As always, it is up to us, the consumers, to carefully read the terms of any credit card we have or decide to open. The rules and regulations in the CARD Act are meant to provide consumers a clear and concise foundation to successfully navigate the world of credit and personal finance.

Published Feb 25, 2010.