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.
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