The Credit CARD Act

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Are you carded? No, not with an ID verifying your age—with a credit card. If so, you recently received a notice about changes to your card company’s practices, courtesy of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009.

The background. The CARD Act, which was signed into law in May 2009, introduced new safeguards designed to make your credit cards more user-friendly. The safeguards take effect in three phases.

You may remember receiving a mailing about the first part of the CARD Act in August 2009. That notice stated you now had 21 days to pay your monthly bill, you were to receive 45 days notice of any changes the credit card company planned to make to your account, and you had the right to opt out if you disagreed with those changes.

The second notice—the one you just got—starts phase two of the CARD Act. Here are some of the changes that took effect on February 22, 2010.

Billing

  • Information on your statement will alert you to the value of paying a larger amount each month as opposed to making the minimum payment.
  • Toll free numbers for credit counseling are now listed on your statement.
  • Your due date will be the same each month.

Rates and fees

  • Rate increases based on your payment history with other creditors are no longer allowed. However, your interest rate can still be increased on new balances if the bank gives you 45 days notice and the option to refuse.
  • Over-limit fees are banned unless you agree to them in advance.
  • Up-front fees are limited to no more than 25% of your credit limit during the first year.

Protection for young borrowers

  • New rules apply if you’re under age 21. To obtain a credit card in your name you must show proof of income to verify you can repay charges made to your card. If you can’t, you’ll need a co-signer who is over 21 and has a good credit record.

The upshot. Despite the new law, credit card companies still have considerable leeway in setting interest rates and fees.

What’s next. The third phase of the CARD Act will become effective August 22nd of this year. In addition, the Federal Reserve is issuing new disclosure rules for credit cards that will take effect on July 1.

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