Are you looking forward to February? Yes, it’ll be nice to get flowers from your honey on Valentine’s Day. But even better is getting credit card reform from Uncle Sam. The Credit Card Accountability Responsibility and Disclosure Act or Credit CARD Act for short was signed into law this spring and most of it goes into effect next February. It is the most wide ranging credit card reform we have ever had and it couldn’t have come at a better time.
Wondering what all the reforms mean to you and the cards in your wallet? Here’s what to expect.
Rates
The most important part of the new law will be its rules on rates. However, the key to taking advantage of all these benefits is to make sure you pay your bills on time. If you’re not a good customer the bank will not be nice in return.
- Retroactive rate increases or universal default are now banned.
- There can be no rate increases in the first year unless you have a promotional rate.
- If you have a standard fixed rate, your rate stays the same for the life of your balance.
- You have to be notified of future rate increases to your standard fixed rate at least 45 days in advance. AND the rate increase would only apply to new purchases not your existing balance.
Payments
- Before issuing new cards or raising limits, banks must consider your ability to make the payments. Credit will not be as easy to come by as before.
- Payments will be due at the same day and time each month.
- Your payments will be applied to your highest interest rate first.
Fees
- Over the limit fees can only be charged once per month and only if you have opted in to this fee. If not, your transaction will simply be declined and you will have no fee.
- Penalty fees such as late fees must be reasonable as deemed by the Federal Reserve Board.
- Your finance charges must be based on your current balance not your previous balance.
College Students
- No more free T-shirts. Credit card companies can no longer offer any freebies or other incentives to young consumers for filling out a credit card application.
- Everyone one under the age of 21 must have a co-signor unless they can provide proof of their own independent income.
- Marketing by mail and on campus will be limited.
A Good Resource
Consumer Reports has put together an easy to read overview of all the changes on their Credit Card Reform website.
