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The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 has been passed by both the House and the Senate, and was signed into law by President Barack Obama on Friday.
What will the ramifications of the CARD Act be?
It is supposed put a limit on credit card companies frequency of rate increases, make the credit card companies be upfront when raising rates, as well as limiting the severe penalties frequently place on people who are occasionally late by a day or two on their payments. The bottom line is that it should be good for credit card users. However, credit card issuers are going to find other methods to keep their income from decreasing, so there is the possibility that rates could go higher (even though they may not be increased as frequently as they are sometimes right now). Annual fees could become more frequent, and rewards could be reduced. It is too early to predict if or to what degree these will happen though.
Some of the highlights of the Act include:
- Credit card companies must provide consumers with a 45-day advance notice of changes in rates and other significant changes to account. (Rate changes due to changes of prime rate are exempt.)
- Credit card issuers cannot increase the annual percentage rate (APR) during the first 12 months of opening up a new account.
- Promotional rates must remain in effect for at least six months from the beginning date of that promotion.
- Credit card issuers are prohibited from charging a finance charge based on the double billing cycle method, except in limited circumstances.
- If two or more different APRs apply to different portions of an outstanding balance, the amount of any payment above the required minimum payment needs to be applied to the balance with the highest APR first and then to lower APR balances.
- Card issuers are required to send credit card statements at least 21 days before the due date of the outstanding balance.
New Credit Card Rules for College Students
- Cards cannot be issued to those under 21, unless they have a parent or guardian co-signer, or proof of independent means of repayment. For college students without a co-signer, the maximum amount of credit extended will be limited to the greater of 20 percent of the student’s annual gross income or $500 dollars.
- Inducements to college students prohibited- No card issuer or creditor may offer to a student at an institution of higher education any tangible item to induce such student to apply for or participate in an open end consumer credit plan offered by such card issuer or creditor.
- No extra fees for making payments over the phone or internet- unless it is an expedited fee on the day before or day of the payment due date.
Read the full text of the 2009 CARD Bill approved by the House and Senate.
Similar Posts:
- Some New Credit Card Rules Put in Place- What Will The Effect Be?
- What You Should Know about the New Credit Card Rules and Regulations
- Credit Card Debt Elimination Using a Zero Percent Balance Transfer
- College Students and Credit Card Debt
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My fees shot up 6% for no reason right before the act was passed. I always only carry a small monthly balance, and it’s paid off each month. Thank goodness they can’t do this any more in the future.
Fundamentally I do not like the idea of having to legislate things to save us from ourselves. The items in this Act that could be handled by responsible credit card users I am not a fan of. For instance I think it is a bit silly to outlaw the free shirts and hats. Use of that tactic was declining anyway because so many college students began to get cards before college.
However I do like the portions that increase disclosure.
@CD Rate Guy- That could have been a result of the pending legislation- I would not be surprised if companies continue to do this until the CARD act takes effect.
@Tom- I understand what you are saying- but I do think those changes are probably a good idea, overall.