subject: Getting To Know The Advantages Of The New Credit Card Law [print this page] On May 22,2009 the Credit Card Accountability, Responsibility and Disclosure, or Credit CARD Act of 2009 was passed into a law. As a consumer, it is your right and responsibility to learn the changes brought about the New Credit Card Law. Why? Will these changes help you stay out of debt problems?
Let us take a look at the highlights of the new law and consider the advantages:
No sudden rate increases. In the past years, many cardholders have found themselves stuck in bad debt due to the sudden increase in their interest rates. Missing your deadline with any creditor could mean an increase in your credit card rate even if you are on time paying off your balances. Thankfully, the dreaded "Universal Default Clause" has now been abolished. The interest rate cannot be changed by issuers within the first year of the card's issuance. Credit card issuers can still raise your current interest rate but only for three reasons:
- if the promotional rate has expired (promotional rates must not be shorter than 6 months)
- if the Variable Index Rate has increased
- if the cardholder has been late for 60 days or more.
Longer advanced notice period. If a credit card issuer plans to increase the present rate, it must send its cardholders an advanced notice at least 45 days prior to the rate changes. Currently, banks are only mandated to give a short 15-day notice. Restrictions on other fees. Issuers must be more careful about charging additional fees. For instance, cardholders cannot be charged with extra costs for making their payments through online or phone banking.
High-rate debts paid first. Payments beyond the minimum due required must be applied to the highest rate debt first. That is contrary to the current rule where payments are applied to the lowest-rate debt first, giving cardholders a longer time paying off their debts.
More time to make payment. The new rule requires all credit card companies to send a billing statement at least 21 days before the due date. This will allow cardholders to pay off their debts before getting penalized by late fees. Longer lifespan for gift cards. Gift cards must be given least a 5-year expiration period. Issuers are not allowed to charge inactivity fees unless the gift card has not been used for more than 12 months.
Double-cycle billing is never allowed. A credit card with a double-cycle billing can be risky since you will still get finance charges based on your previous and current balance. Under the new law, the double-cycle billing is prohibited. Student credit card limits. Students under the age of 21 cannot apply for a credit card unless they have a co-signer or they can show proof of their own income.
Yes, credit card issuers cannot just change their rates and fees at any given time. The New Law has been made to help consumers stay out of bad credit. Nevertheless, it is still important to remember that it can only work out if payments are submitted on time and credit card use is put in control.
