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What the law means for you

The Credit Card Accountability Responsibility and Disclosure Act (CARD Act), which became law on May 22, 2009, affords consumers more detailed information and expanded options in the area of credit.

The Credit CARD Act

As a result of the Act, consumers are afforded:

  • Safeguards against rate increases
  • Improved billing practices
  • New fee restrictions
  • Increased disclosures
  • New protections for consumers under 21

Safeguards Against Rate Increases

  • Under the Credit CARD Act, rate increases are prohibited during the first year and promotional rates must last for six months or longer.
  • The Act prohibits "double cycle billing," where credit card holders are charged interest on debt that is paid on time during a grace period, and "universal default," where a lender changes a loan from the normal to the default terms when the consumer defaults with another lender.
  • After the first year, cardholders must be notified of significant changes to the terms of an account 45 days before the changes take effect. New rates may not go into effect for 14 days after the notice of change is mailed. The consumer will also be afforded the option to cancel the account and pay off the balance at the existing rate.

Improved Billing Practices

  • The Credit CARD Act allows consumers 21 days to pay their monthly credit card bills (compared to the former minimum of 14 days).
  • Payment due dates must fall on the same day of each month.
  • Consumers must be allowed three weeks between the time a bill is mailed and the time it's due.
  • Under the Act, credit card statements must appear in a specific font size for easier readability.

Fee Restrictions

  • In almost all cases, consumers can't be charged for which method they use to pay their credit card bill (by check card, phone, mail etc.).
  • 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.

Increased Disclosures

  • Consumers must be provided with disclosures about how long it will take them to pay off a balance if only minimum payments are made.
  • Credit card agreements must be available to consumers online.
  • Under the Credit CARD Act, billing statements must include the payment due date, the minimum amount due, the ending balance and detailed information about late fees.

Protections for Consumers Under 21

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

Consumers should handle credit card accounts responsibly and spend within their means to build good credit while avoiding falling into debt. For more information on using credit wisely, view our information on Credit and Debit.

To read the Credit CARD Act of 2009 in its entirety, click here.

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