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Guide to the Credit Card Act

The Credit CARD Act, otherwise known as the Credit Card Accountability Responsibility and Disclosure Act of 2009, was passed on May 22, 2009 by the United States Congress and subsequently signed by President Obama. This act is intended to provide a comprehensive credit card reform and the legislation ensures that credit card companies establish transparent and fair practices when extending credit to consumers.

Card companies can no longer arbitrarily raise interest rates

The new legislation ensures that cardholders are protected from arbitrary raises in interest rates and requires credit card companies to give 45 days-notice of interest rate increases. Cardholders who cancel their card are given the right to pay off the balance at existing interest rates even if interest rates are raised. Cardholders are given 3 billing cycles to decline new terms imposed by credit card companies. Credit card companies are no longer able to retroactively increase their interest rates on an existing balance if the cardholder is in good standing and the reasons for the increase are not related to cardholder behavior. Card companies are prohibited from changing the terms of the contract they have with the cardholder and can no longer arbitrarily raise interest rates or pricing.

Double-cycle billing is now prohibited

Cardholders who pay on time can no longer be penalized and prohibits card companies from double-cycle billing practices. Customers who had a rate increase and have paid on time for a period of six months must have their interest rates returned to what the rate was before an increase was made. Creditors have to review the payment history and then determine if a rate increase is warranted. With the Credit CARD Act, cardholders are protected from any due date gimmicks.

Card companies now have to mail their statements 21 calendar days before the bill is due. The previous time was 14 calendar days prior to the due date. The act requires that the due date be on the same day each month. If weekends or holidays intervene then the due date is the next business day. All statements must now contain internet access and phone numbers so that customers can have easy access to pay balances. Card companies are no longer allowed to charge late fees if the cardholder has proof that payment was mailed 7 days before the bill due date.

Misleading terms must be made clear

Cardholders are now protected from misleading terms such as "prime rate" and "fixed rate". People who apply for a credit card but then decide not to keep it can now reject the card until the moment it is activated without it adversely impacting their credit rating. Creditors must now have a minimum sized font on all statements so that credit card terms can be more easily read. Card companies are prohibited from imposing excessive fees on those who hold credit cards. Over-the-limit fees are now restricted over the course of 3 billing cycles. Unless credit card holders notify creditors they permit approval of over-the-limit charges they are not allowed to be charged a fee for this. Accounts that have balances over the credit card limit are only allowed to be charged fees if bill payment is late.

Statements must have information on length of payoff time

Creditors are required to print on bill statements how long it will take for the cardholder to pay off the card if only the minimum balance is paid each month. The statement must also show how much interest is added over the course of the debt if only the minimum payment is made. The statements must further include information on the amount of money that should be paid each month to allow the cardholder to pay off the debt in three years. Credit cards to teens are limited by the Credit CARD Act and credit cards cannot be issued to anyone under 21 years of age unless there is a co-signer over 21, or proof of an ability to repay is provided.

These new requirements have made a big impact on the often unfair and arbitrary charges that were routinely imposed by card companies. Cardholders now have legislation to protect them from unfair business practices. The practice of giving credit cards to teens often led to young people having large credit card bills by the time they reached their twenties. Teenagers and young adults often do not have a large disposable income and late payments were often incurred. Late payments have an impact on credit scores and often the young cardholder was adversely affected by low credit scores that could take years to bring back up. This legislation was needed to curb the anything goes credit company mentality that imposed ever larger fees and charges for any small transgression. People wishing to take out loans to pay their credit card off sooner may wish to check a loans calculator to see what the potential savings can be.


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