What Does the Credit CARD Act Mean for You?
The intention of a new law that went into effect in February of this year is to protect consumers from unfair credit card billing practices. This law, known as the Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act for short), also sets restrictions on the availability of credit cards for people under the age of 21 and prohibits the marketing of credit cards on college campuses.
Credit card companies must now give customers a 45-day notice of any significant changes to their accounts, such as interest rate increases or increases in annual fees or late fees. Credit card companies must also give you the option to cancel your card before such changes take effect. Your monthly credit card bill must now be mailed at least 21 days before payment is due and must now have a consistent due date month to month. Credit card companies must also now include information about how long it will take you to pay off your balance if you make only minimum payments and how much you would need to pay each month to pay off your balance in three years.
Under the new rules, for the first year after you open your account, credit card companies cannot raise your interest rate, and after the first year, interest rate increases can apply only to new charges. In addition, when balances have multiple interest rates, any payment above the minimum payment required must generally be applied to the balance with the highest interest rate. Under the changes, if you make a transaction that would take you over your credit limit, your credit card company must turn it down unless you have told them to allow such transactions.
Critics of the new rules say there are many loopholes in this act. For instance, the rules about rates apply only to fixed-rate cards and not to the variable-rate cards that make up the bulk of all credit cards. For many of the benefits this act provides to consumers, Credit card companies have found a way to circumvent many of the benefits this act provides. ABC News recently made Credit CARD Act loopholes the subject of a news segment.
Still, there are many bright spots. Bills must be mailed 21 days before they are due. Due dates must be consistent, and companies must tell you how long it will take you to pay off your balance.
Test your knowledge of the Credit CARD Act here.
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Even with the loop holes this is still a step in the right direction. First, I know back in the 90's as a college student I was bombarded with offers and like many others ended up with thousand of dollars worth of credit card debt. If this law were in place, perhaps I would have been spared the lesson. Second,not being able to raise interest rates without notice is major. I have been victim to this hidden practice and in some cases have had rates raised twice in one year. Although we have a long way to go, we are headed in the right direction.
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ReplyDeleteThis new Credit Card Act is definately a great way to avoid unnecessary overcharged, or at least know about your debt before you're charges. I do not have to worry about that because I do not do credit cards. Maybe in the near future if I want to buy thousands of dollars worth of items. But this is definately a great way to keep track of what your credit card company is billing you.
ReplyDeleteWhile the Credit CARD Act is not perfect, it is certainly a step in the right direction. I did a lot of research a couple of years ago about credit cards and college students, and was disturbed by what I found. Restrictions on issuing cards to those under 21 and targeting college campuses is vital. I, like many others, would like to see the "loop holes" closed, but also understand how difficult passing any financial reform legislation is. Nice job.
ReplyDeleteThis some good information that I did not know and I like the fact that there is restrictions on issuing cards to those under 21. I am sure like anything else that there is loop holes but it is a step in the right direction.
ReplyDeleteThe information you provide is insightful and the Credit Card Act is a step in the right direction for protecting consumers. Most importantly, hopefully it will create some consiousness about the seriousness of "debt" for all who decide to use credit cards in their everyday lives.
ReplyDeleteWhile critics might lament the weaknesses of the act, it was a much needed first step. Now we can compare offers more easily. Hopefully, this will provide a foundation for more more consumer rights to come.
ReplyDeleteIt's crazy how credit card companies are like vulchers. I can remember my freshman year of college, I was away from home, with no job and had those credit card companies offering me the world. They made it sound so easy, sign up, get a free gift, and get a credit card, just like that. But it was not that easy, I got 3 credit cards just like that, and was not thinking about how I was going to pay for them. I did not have any parental guidance on campus to help me, so I thought I was doing the right thing. It took me about 10 years to get those 3 credit cards paid off and I vowed to never get another credit card.
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