Some New Credit Card Rules Put in Place- What Will The Effect Be?

A few of the new credit card rules which were part of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 took effect yesterday.

Card issuers must give 45 days notice before increasing fees or changing (raising) interest rates
Card issuers must send out monthly bills at least 21 days before the due date-which hopefully will help some people avoid paying late fees.

The rest of the CARD Act credit card rules are set to go into effect in February of 2010.

What will the effect of the changes in credit card rules be?

Although the rules seem to favor the consumer or credit card user by not allowing credit card issuers to change the rates on a card to quickly, and possibly decrease the amount and frequency of late fees being charged to individual card holders, we all know that the credit card companies will try to make up the lost revenue some how.

According to this article discussing the new credit card rules from Business Week, penalty fee income rose 43% between 2003 and 2008, and was $19 billion dollars last year. The article also discusses how the average credit card rate has increased recently, in part likely sue to a need by credit card companies to make up for the lost revenue.

Overall, I think forcing the credit card companies to be more transparent about the penalties and fees they try to impose on a card holder, as well as placing restrictions on the frequency or interest rate hikes is a good thing. It should make the fine print from credit card companies that most people don’t read and even fewer can actually understand- a little easier to follow.

But it may cause people to pay a little more, which may be a wash (hopefully it would not result in more money to the card companies-but it could). Some people may pay more in interest but not get nicked in fees, but someone who always pays their bill on time may be paying more overall.

photo credit: Andres Rueda