Know the Rules of the Credit Card Game
I was giving a talk recently and asked everyone who had credit cards to give them to me. Then I issued a challenge: Can anyone tell me at least three of the new reforms under the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009?
Several of the new rules, which aim to curb some of the worst industry practices, go into effect this month. Yet not a soul -- and there were financial professionals and even a personal finance journalist in the room -- could name one.
The requirements under the CARD Act become effective in three stages. While most of the provisions don't kick in until next year, a few key provisions go into effect Thursday. They are:
-- Creditors must provide written notice to consumers 45 days before increasing an interest rate or making a significant change to account terms. This compares with the 15-day notice currently required.
-- Creditors must inform consumers in the same notice of their right to cancel the credit card account before the increase or change goes into effect.
-- Creditors generally must mail or deliver statements for credit cards and other open-end consumer credit accounts at least 21 days before payment is due. Beginning in February, due dates must be on the same day each month. If your due date falls on a day that the creditor does not accept payments by mail (such as weekends or holidays), the creditor cannot treat a payment received the following business day as late.
The new rules are coming at a time when many cardholders are expressing frustration with the status quo. In a newly released survey by the advocacy group Consumer Action, respondents reported that their interest rates have been shooting up, minimum payments are rising and credit limits are being drastically cut.
Several major banks recently informed cardholders that they will be moving them from fixed rates to variable rates. Why?
Under the CARD Act, issuers cannot raise interest rates on existing balances except under certain limited conditions. One of those conditions is if the card carries a variable indexed interest rate.