Quick Credit Cards

Nine months later, the Credit CARD Act of 2009 is finally going into full effect. We’ve seen banks slowly react to the new laws by working the loopholes, rather than complying ahead of time, but come Monday February 22, 2010, all the provisions of the CARD Act will be law. Here are a few of the key changes to the law that matter to consumers:

Credit Card Disclosures

Credit card issuers must now give you 45 days notice before making changes to your rates or fees. This includes:

• Interest rate hikes (for fixed APR credit cards)
  • Doesn’t apply to variable rate cards
  • Doesn’t apply for changes after an introductory rate expires
  • Doesn’t apply for defaulted accounts
• Change annual fees, cash advance fees or late fees that affect your card
• Make other “significant changes” to your terms

If you don’t like the changes, you have the right to close your account. Closing your account will let you opt out of the changes and you will have a minimum of five years to pay off your balance. Note: this could mean that your minimum payment will go up.

Credit card companies must tell you how long it will take to pay off your balance. A new section will be added to your bill that tells you how long it will take to pay off your credit card with the minimum payment as well as how much you will end up paying in interest. Also, your bill must show you how much you will have to pay to eliminate your credit card debt in three years and how much interest you will pay in that scenario.

Billing and Payments

Credit card companies must deliver your bill at least 21 days prior to the due date.

Credit card bill due dates must be the same each month.

Payments sent prior to 5 PM on the due date are considered on time.

If due date  falls on a a holiday or weekend, credit card companies must accept payments as “on time” on the following business day.

Credit card payments apply to highest interest balances first. For example, if you have a cash advance balance at 20.99% and a normal purchase balance of 13.99%, your payments pay down the cash advance balance first. This does not apply to purchases for deferred interest plans. If you wish to pay down the balance on deferred interest, you must request that extra payments be applied to that balance. Otherwise, your credit card company will begin applying payments towards the deferred interest 2 billing cycles prior to the end of the deferral period.

Double-cycle billing, otherwise known as two-cycle billing, has been banned.

Credit Card Fees, Rates and Limits

Credit card issuers cannot increase your interest rate in the first 12 months after signing up for a card.  There are the usual caveats to this rule, however:

• Does not apply to variable interest rate credit cards.
• Introductory rates can still be offered (for a minimum of 6 months)
• Does not apply if you are over 60 days late on a payment

Increased rates will only be applied to new charges. For example, if you have $5,000 in debt at 13.99% and the credit card company raises  your interest rate to 17,99%, you’ll still pay 13.99%  on the original $5,000. Subsequent balance accrued will be financed at 17.99%.

Cardholders must opt-in for over-the-limit protection. Otherwise, your card will simply be denied if you are maxed out. If you do opt-in for over-the-limit protection, your credit card company can only fee you once per billing cycle for going over-the-limit.

Credit card fees are capped at 25% of the initial credit limit. This only applies to annual feels, application fees, etc. and does not include penalties.

Consumers under 21 must have a co-signer or show proof that they can make payments.

With all that being said, it’s important to note that the CARD Act doesn’t cover everything. Be sure you’re aware of what’s not in the CARD Act. After February 22, credit card companies will still be able to do the following:

What’s Not Covered by the CARD Act

Credit card companies can raise your interest rate after 12 months without cause. All they need to do is notify you, pursuant to the above rules. This will apply to your future purchases.

There is no cap on interest rates. This is something that consumer advocates fought hard for but didn’t get into the bill. Credit card companies can still charge you sky high rates if they want (and if its commercially viable). But of course, you can always close your account if this happens.

New fees are fair game. The CARD Act made the mistake of specifying the fees that it was restricting. The new kids on the block – stuff like dormancy fees, paper statement fees and foreign transaction fees – are still on the table. Read more about new credit card tricks in the post-CARD Act era.

Your credit limit can still be reduced. Issuers can still cut down on your rates or even close your account without the 45 day notice. Be sure to call and ask why if this happens, since it can be hell on your credit rating.

Variable rates still suck. While efforts have been made to protect your fixed rate APR from getting jacked up, variable rate credit cards, by nature, can still go up and up for essentially no reason.

How do you feel about the new changes thanks to the CARD Act? Do you feel safe as a credit consumer? Or do you feel like it’s too little, too late? Sound off in the comments.

Image: SEIU International

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