What You Need to Know about New Credit Card Rules
Next week, the provisions of the 2009 Credit Card Accountability, Responsibility, and Disclosure Act (CARD) will go into effect, helping consumers better understand their statements and how interest charges are calculated.
The new laws will affect millions of cardholders. According to a 2009 Nilson Report, the average American has five credit cards and the typical household with at least one has over $10,000 in debt. Read on to learn what you should know about the new rules.
Overdraft fees produced $25-$38 billion of revenue for banks in 2009. Currently, consumers can be enrolled automatically in overdraft protection, but the CARD Act stipulates that consumers must explicitly request it in the future.
If a cardholder chooses to enroll, issuers can only apply overdraft fees once per billing cycle, and the issuer must let the consumer know how much they will be.
The consumer has the right to opt out of overdraft protection whenever he/she chooses. However, the new rules extend only to debit cards and not to overdraft charges from electronic transfers or checks.
Changes to Know About
Two of the provisions of the Credit CARD Act have already taken effect. Consumers currently have 21 days to make their payments instead of 14, and issuers must provide 45 days’ notice of terms changes instead of 15.
The lone exception to the 45-day notice rule is if the issuer decides to reduce your borrowing limit. Companies may do that at any time without advance notification.
If your credit limit is reduced, you can call your issuer and request that it be reversed. If the company refuses, pay the outstanding balance off as quickly as possible, as a credit-limit reduction will likely hurt your score.
Staring on Monday, statements must tell the consumer how long it will take to pay the outstanding balance and how much interest the individual will pay if he/she pays just the minimum payment each month.
For instance, if a consumer has a $5,000 balance with a 14-percent APR, the issuer must make clear that it would take ten years to repay the balance plus almost $2,000 in interest charges if only the minimum payment is made.
Changes to Interest Rates and Fees
When the Credit CARD Act passed in 2009, issuers raised specific interest rates and fees preemptively to compensate for the $50 billion in revenue they were expected to lose. In fact, since June of 2009, the top 12 credit unions and banks in the U.S. have raised their rates by about 23 percent.
Although the Act does not impose a limit on interest rate increases, credit card issuers must provide consumers with 45 days’ notice on any rate changes, and the issuers are not permitted to increase the current interest rate on consumers’ existing debt.