I'm sure many of you have opened your credit card bills to some nasty surprises in the last year; surprise interest rate increases and nasty lower credit limits – even for those who pay on time!
Last week, President Obama signed the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CCARD) also known as the Credit Cardholder's Bill of Rights that's been called "sweeping legislation that reforms the credit card industry" and a homerun for consumers. Is it? Let's see …
Here's some good news for consumers:
- Credit card companies can't raise your rates on existing balances unless you're 60 days behind.
- If the rate does go up, you can get the old rate back if you pay the minimums on time for 6 months.
- They can't raise rates for at least a year after you open an account.
- If you close your account, the interest rate is frozen.
- Teaser rates must last at least 6 months.
- If you have multiple interest rates, anything more than the minimum goes to the balance with thehighest interest rates.
- Cardholders must be given the option of having a fixed credit limit that cannot be exceeded, and card companies cannot charge overlimit fees on cardholders with fixed limits.
- Cardholders may elect to have transactions that would cause them to go overlimit declined.
- Overlimit charges can only be charged when a purchase, rather than a fee or interest charge, causes the credit limit to be exceeded.
- Overlimit charges can only be applied once during a billing cycle.
- No interest can be charged on fees (such as late fees or overlimit fees)
- Your bills must be sent out 21 days before the payment due date (current requirement is 14 days)
- No one under 21 can get a credit card without a co-signer or proof that they are able to repay the credit (a job)
- You can pay your bill by mail, phone, electronic transfer or online without additional cost unless you need to pay at the last minute.
- Consumers must get 45 days notice of any change in the terms.
- Gift cards can't expire for 5 years and they can't charge fees against the balance for not using it.
- No more universal default (one company could increase rates if you had a late payment to another creditor even if you had a good on-time payment record with the first company)
- They have to tell you how long it will take to pay off the balance if you only make minimum payments and the total amount of interest you'll pay.
Here's the bad news …
- Changes don't go into effect for 9 long months.
- Expect credit card companies to jump up your rates between now and then even without a late payment.
- Credit card companies say that reward programs will be canceled, low-interest teaser rates won't be available and overall credit may be harder to get. They may also re-institute annual fees and try to find other ways to increase their bottom line.
What should you do now?
- Pay your debt on time. This has always been important but is even more important now. Don't give them a reason to hike your interest rates.
- Create a plan to pay your debt off. This is the hardest area for most people to do because they just don't know how to pay their debt off in the most efficient and cheapest way.
- Don't close old accounts and keep all your cards active by putting a couple of small purchases on them every month. Pay off, of course.
- Watch your statements every month because some of the credit card companies may actually start implementing these changes even before the deadline.
- Watch your mailbox for instructions from your creditors regarding choices you'll need to make to your account.
- Use your points or other rewards now because the plans are sure to get less generous or even eliminated.
It's about time credit card holders are finally getting a break!