Reminder: CARD Act goes live Monday

February 20th, 2010. By AbiK

Monday, February 22 is the day we finally see the new credit card rules go into effect. For those of you who missed all the news on this last fall, the new rules come as a result of the Card Accountability, Responsibility and Disclosure Act—aka CARD Act for short.

We outlined what the CARD Act will mean to you in an earlier post—and we wrote about some of the credit card pitfalls you should look out for—but just to recap:

Limits on Interest Rate Hikes: Interest rate increases on existing balances would only be allowed under certain conditions, such as when a promotional rate ends, there is a variable rate, or if the cardholder makes a late payment. Interest rates on new transactions can increase only after the first year. Significant changes in terms on accounts cannot occur without 45 days’ advance notice of the change.

No more Universal Default: “Universal default,” when interest rates are raised based on customers’ payment records with other unrelated credit issuers (such as utility companies), would end. 

More Time to Pay Monthly Bills: Credit care issuers will have to give card account holders “a reasonable amount of time” to make payments on monthly bills. That means payments would be due at least 21 days after they are mailed or delivered.

Clear Due Dates and Times: Credit card issuers would no longer be able to set early morning or other arbitrary deadlines for payments. Cut-off times set before 5 p.m. on the payment due dates would be illegal under the new credit card law. Payments due at those times or on weekends, holidays or when the card issuer is closed for business will not be subject to late fees.

Highest Interest Balances Paid First: When consumers have accounts that carry different interest rates for different types of purchases (i.e., cash advances, regular purchases, balance transfers or ATM withdrawals), payments in excess of the minimum amount due must go to balances with higher interest rates first (right now, it happens in the opposite way).

Limits on Over-Limit Fees: Consumers must “opt in” to over-limit fees. Those who opt out would have their transactions rejected if they exceed their credit limits rather than incurring a fee.

End of Double-Cycle Billing: Finance charges on outstanding credit card balances would be computed based on purchases made in the current cycle rather than going back to the previous billing cycle to calculate interest charges. The current two-cyle or double-cycle billing hurts consumers who pay off their balances, because they are hit with finance charges from the previous cycle even though they’ve already paid in full.

Fee Limits on Subprime Credit Cards: People who get subprime credit cards (typically those consumers who have bad credit) and are charged account-opening fees that eat up their available balances get some relief-the upfront fees cannot exceed 25 percent of the available credit limit in the first year of the card.

Truth about Minimum Payments: Credit card issuers must disclose to cardholders the consequences of making only minimum payments each month, namely how long it would take to pay off the entire balance if users only made the minimum monthly payment. Issuers must also provide information on how much users must pay each month if they want to pay off their balances in 36 months, including the amount of interest.

So be on the lookout for these new changes on your next credit card billing statements—if you haven’t seen them starting to show up already.

Tags: CARD Act, Credit Card

This was posted on Saturday, February 20th, 2010 at 5:53 pm and is filed under Consumer Fraud . Feel free to respond, or trackback. Read our comments policy.