The Credit CARD Act: What it Means for You
The name is a mouthful but it’s an important one to know: it’s the Credit Card Accountability Responsibility and Disclosure Act (CARD Act), and it became law on May 22, 2009. Its purpose is to give consumers more information and options around credit.

Here are a few things the Act means for customers:

Safeguards Against Rate Increases

  • Under the Credit CARD Act, rate increases aren’t allowed during the first year, and promotional rates need to last at least six months.
  • The Act prohibits "double cycle billing," where credit card holders are charged interest on debt that’s paid on time during a grace period.
  • It prohibits "universal default," where a lender changes a loan to default terms because the consumer has defaulted on a loan with another lender.
  • After the first year, cardholders must be told about major account changes 45 days before they take effect. New rates can’t start until 14 days after the notice is mailed. The cardholder has the option to cancel the account and pay off the balance at the existing rate.

Improved Billing Practices

  • The Credit CARD Act gives consumers 21 days to pay their monthly credit card bills (compared to the former minimum of 14 days).
  • Payment due dates must be the same day of each month, and consumers need to be allowed three weeks between the time a bill is mailed and when it’s due.
  • Credit card statements need to be in a specific font so they can be read easily.

Fee Restrictions

  • In almost all cases, consumers can’t be charged for the method they use to pay their credit card bill.
  • The Credit CARD Act limits fees consumers can be charged for spending over their credit limits.
  • There are new limits to the fees consumers can be charged on subprime cards (cards with higher rates and fewer rewards).

More Disclosures

  • Consumers must be told how long it will take them to pay off a balance if they only make minimum payments.
  • Credit card agreements must be made available online.
  • Statements need to include the payment due date, the minimum amount due, the ending balance and late fee information.

Protections for People Under 21

  • Under the Act, people under 21 will only be able to get a credit card with proof they can make payments on their own, or with the help of an adult co-signer.
  • The Act restricts incentives given to students who sign up for credit cards.

To read the complete Credit CARD Act of 2009, click here.

Source: Credit Card Reform: What it Means for You, the American Bankers Association.