Bewares and Benefits of the Card Act

In 2009 President Obama signed the Card Act into law and most provisions went into effect in February of 2010. While there are certainly some loopholes, consumers should expect to see some benefits from the Card Act.

Benefits of the Card Act
Issuers can't raise rates on an existing balance unless...
- a promotional rate expired
-the variable indexed rate increased
-or you paid late by 60 days or more.
No longer will they be able to punish borrowers for late payments on unrelated accounts under the practice of universal default or due to "anytime, any reason" clauses.

f the cardholder does trigger the default rate because of a 60-day delinquency...
-the bank must restore the lower rate once the cardholder demonstrates six months of consecutive on-time payments.

In general, rates can't be raised in the first year after issuance, and promotional rates must last at least six months unless...
-a promotional rate expires
-there's a termination of a workout plan
-or a change in the index rate or a 60-day delinquency.

Cardholders will not face overlimit fees unless...
-they elect to allow the creditor to approve overlimit transactions.
-Also, issuers can't charge more than one overlimit fee per billing cycle.

Banks can't charge you for paying your credit card debt by phone or internet unless...
-you opt for an expedited payment.

Consumers get at least a 21-day billing cycling from the mailing date. There can be no more retroactive rate increases. There can be no more weekend or middle of the day deadlines. Credit card contracts will have to be written in plain language and must be posted on the internet where consumers and watch dogs can easily see them. Finally, credit card companies are required to show card holders just how long it will take them to pay off their credit card debt if they make only the minimum payments.

Financial advisors have long been trying to get consumers to do the math on this practice. As you can see, there are real benefits for consumers built into the Card Act but here are two policies to beware of as well.

What about enforcement of these rules? The Card Act significantly raises penalty fees for institutions that violate these rules in hopes that deterrents will help with enforcement.

Beware of These Card Act Policies
The new Card Act rules don't cap interest rates, which can still be up to triple your existing APR.

Issuers can still raise rates at any time for any reason on new balances if they give 45 days advance notice.

It used to be only a 15 day notice so this is better but it is important to open and read all correspondence from credit card companies.

The most important thing is to be aware of the protections that the Card Act will provide you but even more importantly know the "fine print" and what they can do to you and your credit.