Will Consumers Get Relief From The New Credit Card Law?

The Credit card accountability, responsibility and disclosure law goes into affect on August 20

,2010 The objective of the law is to safeguard consumers from unfair practices by banks and other credit card issuers. However, it may be a case of too little to late. The law was put into affect in February 22,2010. The six-month lag for its enactment gave credit card companies adequate time to modify fees and position themselves before it becomes effective. Therefore, the law may be of little value and more of a demonstration that the government is protecting the consumer that the actual affect it will have on their credit cards, fees they pay and ultimately the biggest problem of too much debt..

Here are the highlights of the new law:

"Retroactive rate increases - Issuers can't raise interest rate unless promotional period has expired. . Cardholders cannot be punished for universal default, anytime or any reason clauses and for non-related accounts. When a cardholder shows that he has paid on time for the past 6 months, the issuer must reinstate the lower interest rate.

"Notice of Rate Hike - establishes a 45 day period for key contract changes and rate hikes. This is not applicable to credit card limit changes.. The laws does not stipulate a limit on interest rates. Your APR rate can still triple.

"Fee Restrictions - Cardholders cannot receive overlimit fees unless they agree the overlimit transactions.

"Restrict Credit Cards to under 21 - Students and other 21 must prove financial independence or have a co-signor over 21 to receive a credit card.

"Double billing cycle - ends the practice of basing interest charges on the current or earlier charges, or double-balance billing.

"Fairer payment allocation - Current payments are applied to lower interest balances first. Now the reverse hold true and must be applied to higher interest rate first.

"More time to pay - The period in which the statement is received prior to payment is extended from 14 to 21 days.

"Gift Card protections - gift cards does not allow gift card from expiring for a minimum of 5 years.

The new law does provide some protection for the consumer, although it could be argued that it does not go far enough. Furthermore, credit card companies have been hiking interest rates, imposing new fees and changing other terms favorable to them in anticipation of the law. As a result the impact of th law will not be as great as had been anticipated.

by: Tom Morton

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