Credit Card Act Made Simple

Feb 23rd, 2010

HERE'S WHAT YOU NEED TO KNOW ABOUT THE NEW CREDIT CARD ACT:

That new Credit Card act went into effect yesterday. Officially, it's called "The Credit Card Accountability Responsibility and Disclosure Act." Or just "The CARD Act" for short.

--When it was passed last May, the idea was to make credit cards more consumer-friendly, and prevent Americans from getting swamped in debt. And according to the Pew Charitable Trust, the new rules will save Americans at least $10 BILLION.

--Here's what you need to know about the CARD Act:

#1.) No more campus giveaways: For years, credit card companies have lured in college students by offering free food and other stuff in exchange for signing up for a credit card. Now, those freebies are banned.

#2.) No marketing at college sporting events: Just like the campus giveaways, credit card companies reeled in students by offering goodie bags at college sporting events. The CARD Act bans that practice, even if the event is held off-campus.

#3.) More restrictions on people under 21: It used to be just about anyone could get a credit card. Now, people under the age of 21 need either a co-signer, or proof of a steady income in order to get a card.

#4.) Minimum payment disclosure: Credit card companies are now required to spell out why it costs more in the long run if you only make your minimum monthly payment.

--And they have to display the monthly payment you'd need to make if you wanted to pay off your debt in 18 months.

#5.) Highest interest rates paid first: Whatever payments you make on your credit card will now automatically be applied to the portion of your debt that has the highest interest rate, so you pay off that portion first.

#6.) Harder to raise interest rates: It used to be that credit card companies could jack up your interest rate for almost any reason at all. Now they have to wait at least a full year before raising a new customer's rate.

#7.) Notice of rate hikes: Credit card companies are now required to give customers 45-days notice before increasing their interest rate.

#8.) No more universal default: Credit card companies used to be allowed to increase your interest rate if you were behind on other bills to, say, the gas company. But they can't do that anymore.

#9.) No more payment fees: Credit card companies are no longer allowed to charge fees to customers who prefer to pay their bill over the phone, or in any other "unconventional" way.

#10.) Consistent due dates: Credit card companies are now required to make your payment due date the same every month.

--Unfortunately, the credit card companies had nine full months to prepare for the CARD Act. And they spent their time figuring out new ways to screw you out of your money. For example:

#1.) New fees: The new Act DOESN'T prevent companies from slapping existing customers with new fees. So they've brought back annual fees, processing fees for paper statements, and inactivity fees if you haven't used your card in six months.

#2.) Higher interest rates: Last year at this time, the average new credit card interest rate was 10.7%. Now the average interest rate on new cards is 13.6%.

#3.) Lower credit limits: Since last year, about 40% of banks cut credit limits on existing accounts, eliminating about $1 TRILLION in available credit.

#4.) More difficult to get and keep a card: The number of Visa, MasterCard and American Express cards dropped 15% in 2009. And the first ones to go were those that were rarely used, or were linked to rewards programs.
(Forbes / Yahoo Finance)