Wednesday 19th of December 2018

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New Rules To Roll Out For Credit Cards

For credit card customers, it’s almost time for the other shoe to drop. That’s because the next wave of regulations under the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 will hit next month.

The first set of rules in the consumer-protection law began during the summer. But the more significant changes occur Feb. 22. They include:

  • Cardholders with a history of regularly paying their statements on time cannot have their interest rates on outstanding balances increased unless the card carries a variable rate or an introductory rate expires.
  • On cards with fixed rates, any rate increases will only affect new charges.
  • If a monthly payment is more than 60 days late, the card company can levy a penalty rate that is much higher and it can even be applied to the existing balance. If payments are made on time for the following six months, the card issuer must reinstate the lower rate.
  • A cardholder cannot be charged a fee for exceeding a credit limit unless he or she chooses to be part of a program that allows the card company to approve the charges that put the cardholder over that limit. Without opting into the program, the company will reject the charges.
  • A person choosing only to make minimum monthly payments must be informed about the amount of time it will take to pay off the balance by paying only the minimum.
  • People younger than 21 cannot get credit cards without co-signers or proof of income that they can pay their own bills.
  • There is a limit to the upfront fees charged by issuers of “subprime” cards for people with poor credit histories. The maximum fee is 25 percent of the approved credit limit.

Other parts of the act went into effect in August. That’s when credit card companies were required to start giving consumers 45 days’ warning that a rate hike was coming and that they know when their payments are due 21 days in advance. The purpose of the change is to allow people enough time to pay their bills and avoid any late fees.

Also, customers are able to choose not to accept an interest rate increase on their cards. However, making that decision means the issuer can close the account and double the minimum payment due each month.

When the account is closed this way, the balance is not due at once. The bank can establish a payment schedule that guarantees the total will paid within a five-year period at the same interest rate charged before the increase was announced.