The Credit Card Accountability, Responsibility and Disclosures Act or CARD Act that was signed on May 22, 2010 provides changes to credit card guidelines and goes into effect on February 22, 2010.
According to the Act credit card regulations and disclosures will be easier to understand and more transparent but at a higher cost to consumers. There will be additional or higher upfront costs for the consumer because of the CARD act. This will greatly impact lower to middle income consumers and consumers with bad credit who are only able to make the minimum monthly payments. Here are some key facts to be aware of regarding the CARD act:
1. Interest Rate Hikes. Interest rate hikes would not be applied to existing credit card balances but is still allowed provided credit card companies give at least 45 days advance notice.
2. Existing Balances. Limits interest rate hikes on existing balances in certain instances.
3. Minimum payments. Credit card companies must disclose the risks of making only minimum payments each month including how long it would take to pay off the entire balance if they only made the minimum monthly payment.
4. Term Changes. Changes in terms on accounts cannot occur without 45 days advance notice.
5. Paying Bills. Credit card payments are due at least 21 days after the monthly statement is mailed.
6. Due Dates. Credit card companies have to set payment cut-off times no sooner than 5pm on payment due dates and payments due on weekends or holidays are not subject to late fees.
7. Over-the-limit Fees. Consumers will now have the option to "opt in" for being charged over-the-limit fees. Those who opt-out would be unable to exceed their credit limits and will be charged a fee.
8. Subprime Credit. Consumers with bad credit who get subprime credit cards are charged upfront fees but cannot exceed 25% of the available credit limit in the first year of using the card.
9. Requires easy explanation of disclosures. Disclosures would also be available online.
10. Under 21. Credit offers can not be made to anyone under 21 unless they have an adult co-signer or can provide proof that they have enough income to repay the debt.
Showing posts with label Credit Card Accountability Responsibility and Disclosure Act. Show all posts
Showing posts with label Credit Card Accountability Responsibility and Disclosure Act. Show all posts
Wednesday, February 17, 2010
Tuesday, January 19, 2010
Credit Card Changes in 2010 Part 2
I have been a member of my local credit union for over 10 years. I have always paid my credit card bill on time or before the due date. I have often received automatic credit limit increases because I am a good customer. I took pride in knowing that I was a good customer and that my credit union appreciated my business.
This past weekend I received a letter from my credit union stating the my fixed credit card interest rate would now become variable effective March 1, 2010 and if I did not wish to have a variable interest rate account I could close my account. In addition, my credit union is converting all of their fixed accounts to variable accounts.
Read any notices you have recently received or will soon receive from your credit card company and make sure you understand the changes being made. If you are not sure call the company and ask them to explain in more detail. If you don't like the new terms you have the option to close your account, however, closing your account may impact your credit score.
If you have good credit your score may drop by a few points, however, if you have bad credit you could see your score drop by several points. Weigh your options if you find yourself in this situation. Here are some things to consider if you find out your fixed rate credit card is being converted to a variable rate credit card:
1. You interest rate will change as the market rate changes.
2. You will pay more in interest and finance charges.
3. If you are sending the minimum monthly payment you could go over your limit if your credit card is maxed out or near the limit.
4. You will have to pay more in fees such as: late fees, over-the-limit, cash advance, balance transfer, annual fees, etc.
5. A variable interest rate makes it difficult to include the credit card payment or an estimated payment amount in your monthly budget or spending plan because you will never know the minimum monthly payment until you receive the statement.
6. Your credit score may or may not be impacted depending on your credit rating (bad, good, average).
7. Shop around at sites like creditcards.com, bankrate.com or cardrate.com to find a credit card that offers a fixed interest rate.
8. Consider using your debit card as a credit card to maintain credit history.
This past weekend I received a letter from my credit union stating the my fixed credit card interest rate would now become variable effective March 1, 2010 and if I did not wish to have a variable interest rate account I could close my account. In addition, my credit union is converting all of their fixed accounts to variable accounts.
Read any notices you have recently received or will soon receive from your credit card company and make sure you understand the changes being made. If you are not sure call the company and ask them to explain in more detail. If you don't like the new terms you have the option to close your account, however, closing your account may impact your credit score.
If you have good credit your score may drop by a few points, however, if you have bad credit you could see your score drop by several points. Weigh your options if you find yourself in this situation. Here are some things to consider if you find out your fixed rate credit card is being converted to a variable rate credit card:
1. You interest rate will change as the market rate changes.
2. You will pay more in interest and finance charges.
3. If you are sending the minimum monthly payment you could go over your limit if your credit card is maxed out or near the limit.
4. You will have to pay more in fees such as: late fees, over-the-limit, cash advance, balance transfer, annual fees, etc.
5. A variable interest rate makes it difficult to include the credit card payment or an estimated payment amount in your monthly budget or spending plan because you will never know the minimum monthly payment until you receive the statement.
6. Your credit score may or may not be impacted depending on your credit rating (bad, good, average).
7. Shop around at sites like creditcards.com, bankrate.com or cardrate.com to find a credit card that offers a fixed interest rate.
8. Consider using your debit card as a credit card to maintain credit history.
Wednesday, January 13, 2010
Upcoming Credit Card Changes in 2010
The Credit Card Accountability, Responsibility and Disclosures Act or CARD Act that was signed on May 22, 2010 provides changes to credit card rules and guidelines. The CARD Act will protect consumers from illegal and deceptive tactics used by credit card companies for years to earn extra money from unsuspecting consumers. Many of the changes go into effect on February 22, 2010, however some changes began in August 2009 and additional changes won't begin until August or December 2010.
Shortly after the bill was passed through summer 2009 many credit card companies began closing accounts of consumers with high balances; increased balance transfer fees, annual, late and over-the-limit fees such as Chase and Bank of America. Bank of America was also the first bank to begin charging the $3 ATM fee.
Credit card regulations and disclosures will be easier to understand and more transparent but at a high cost. They will be additional or higher upfront costs for the consumer because of the CARD act. This will greatly impact lower to middle income and consumers with bad credit who are only able to make the minimum payments. Here are some high points of the CARD act:
1. Existing Balances. Limit interest rate hikes on existing balances in certain instances.
2. Term Changes. Changes in terms on accounts cannot occur without 45 days advance notice.
3. Under 21. Credit offers can not be made to anyone under 21 unless they have an adult co-signer or can provide proof that they have enough income to repay the debt.
4. Universal Default. Universal default which increases interest rates based on payment history for other accounts would not be applied to existing credit card balances but is still allowed provided credit card companies give at least 45 days advance notice.
5. Paying Bills. Credit card payments are due at least 21 days after the monthly statement is mailed.
6. Opt Out. Consumers can opt-out or reject certain changes in the terms on the credit cards. Opting out allows the consumer to pay off the balance in five years in exchange for closing their account.
7. Due Dates. Credit card companies have to set payment cut-off times no sooner than 5pm on payment due dates and payments due on weekends or holidays are not subject to late fees.
8. Over-the-limit Fees. Consumers will now have the option to "opt in" for being charged over-the-limit fees. Those who opt-out would be unable to exceed their credit limits and will be charged a fee.
9. Subprime Credit. Consumers with bad credit who get subprime credit cards are charged upfront fees but cannot exceed 25% of the available credit limit in the first year of using the card.
10. Minimum payments. Credit card companies must disclose the risks of making only minimum payments each month including how long it would take to pay off the entire balance if they only made the minimum monthly payment.
Unfortunately, the CARD act does not cover everything but does provide some help to consumers. The act does not address the issue that there is no maximum interest rate for credit cards and interest rates are not regulated by the government. Interest rates are regulated by each state.
Some credit card companies have raised annual fees to $99 a year including Bank of America and American Express. One bank is offering a credit card with a 79.9% interest rate.
For those who are addicted to their credit cards you may be forced to use cash soon.
Shortly after the bill was passed through summer 2009 many credit card companies began closing accounts of consumers with high balances; increased balance transfer fees, annual, late and over-the-limit fees such as Chase and Bank of America. Bank of America was also the first bank to begin charging the $3 ATM fee.
Credit card regulations and disclosures will be easier to understand and more transparent but at a high cost. They will be additional or higher upfront costs for the consumer because of the CARD act. This will greatly impact lower to middle income and consumers with bad credit who are only able to make the minimum payments. Here are some high points of the CARD act:
1. Existing Balances. Limit interest rate hikes on existing balances in certain instances.
2. Term Changes. Changes in terms on accounts cannot occur without 45 days advance notice.
3. Under 21. Credit offers can not be made to anyone under 21 unless they have an adult co-signer or can provide proof that they have enough income to repay the debt.
4. Universal Default. Universal default which increases interest rates based on payment history for other accounts would not be applied to existing credit card balances but is still allowed provided credit card companies give at least 45 days advance notice.
5. Paying Bills. Credit card payments are due at least 21 days after the monthly statement is mailed.
6. Opt Out. Consumers can opt-out or reject certain changes in the terms on the credit cards. Opting out allows the consumer to pay off the balance in five years in exchange for closing their account.
7. Due Dates. Credit card companies have to set payment cut-off times no sooner than 5pm on payment due dates and payments due on weekends or holidays are not subject to late fees.
8. Over-the-limit Fees. Consumers will now have the option to "opt in" for being charged over-the-limit fees. Those who opt-out would be unable to exceed their credit limits and will be charged a fee.
9. Subprime Credit. Consumers with bad credit who get subprime credit cards are charged upfront fees but cannot exceed 25% of the available credit limit in the first year of using the card.
10. Minimum payments. Credit card companies must disclose the risks of making only minimum payments each month including how long it would take to pay off the entire balance if they only made the minimum monthly payment.
Unfortunately, the CARD act does not cover everything but does provide some help to consumers. The act does not address the issue that there is no maximum interest rate for credit cards and interest rates are not regulated by the government. Interest rates are regulated by each state.
Some credit card companies have raised annual fees to $99 a year including Bank of America and American Express. One bank is offering a credit card with a 79.9% interest rate.
For those who are addicted to their credit cards you may be forced to use cash soon.
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