Fresh Credit Check: Credit Card Act 2010

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As a recent college graduate I am excited to hear about some of the new credit card regulations under the Credit CARD (Credit Card Accountability, Responsibility, and Disclosure) Act. By the age of 19 I was already $6,000 in credit card debt. While that may seem like nothing to some, to me, it was a lot seeing as I only made $5.45 (pre-minimum wage increase days) as a dorm monitor. As a newly minted freshman, the lure of big screen TVs and a new iPod was enough to get me to sign my Jane Hancock on the dotted line that guaranteed a low APR rate—-if I paid on time. Needless to say I got in way over my head as I was more concerned with swiping my shiny new pink plastic friend at every retail store in America than making a plan on how to pay the bill when it came. Thus after five years, numerous late fees, finance charges, arguments with bill collectors, and practicing my linguistic skills in the dialectic styles of Chinese, Indian, and British I am almost debt free. While I new that I was partly to blame for my credit woes, I also knew that credit card companies played an equal role in my down fall. Lol.

Thus, in response to the flat lining economy and credit card companies economically raping consumers, the federal government recently rolled out part of its Credit CARD Act. Here are a few of the new features to help us manage our money and not get caught in the credit debt hall of fame:

• Credit card companies will be required to notify customers 45 days before changing interest rates or other significant terms of an account.

This means that before credit card companies can make any interest rate or other important changes, they must notify you 45 days before. No longer will they be able to make a change on the 5th of the month and it goes in to effect on the 7th without your being informed in a timely fashion.

• Credit card companies must also make sure customers have 21 days between the time statements are sent out and the payment is due (up from 14 days under the existing rules).

Remember getting your statement in the mail on the 10th of the month only to discover that it was due on the 24th and you broke out into a  sweat as you realized your next paycheck wasn’t coming until the 26th? Yes, you probably cursed your mail carrier out three ways from Sunday but in all actuality, some credit card companies intentionally mail the statements later in order to rake up the late charges. Now under this new provision, they are required to allow 21 days between the mail out date and the payment due date.

While those are just two of the changes immediately taking effect, here is a preview of  the rest of the changes to  come in February:

1. Credit card companies will show on your statement how long it will take to pay off a balance if you only make the minimum payments.

Now I have no clue how they are going to show this. They might pull out the old faithful pie chart or just provide a nicely crafted chart. However, the companies will provide some type of representation of how long it will take if you only make the minimum payments. Now please be aware, even if you make the minimum payments, you will still be subjected to finance and interest charges due to the whole balance not being paid off. Remember, this is essentially borrowed money. It is not yours, so the quicker you pay it back, the better for you AND your wallet.

2. Credit card companies can no longer raise interest rates on existing balances if you have been paying on time. Also they will not be able to raise rates the first year an account is open unless there is a time-limit promotional rate that is explained upfront.

This correlates to the provision mentioned above. Say its October 2008 and  you have a balance of $1500 on your Discover card with an APR rate of 8.9%. You have been faithful and paying on time, Yet, in May 2009 you get a notice in the mail that your new APR rate is 17.6%. You look at that and quickly pick up the phone to give customer service a quick tongue lashing right? Well, under the new provision, they will not be able to do that. Now: if your account is more than a year old AND you have been paying on time, they cannot do that. On the flip side if your account is more than a year old and you feel the need to pay as the wind blows, um…sorry for ya, you could be subject to a credit interest increase.

Good: If you are within your first year with a new credit card, your interest rates will not be raised unless there is a time limited promotion.

Bad: More credit card companies will begin offering “90-day low APR rate” or “0% APR rate for first six months” type of deals to get around this new provision. Thus they will still be able to make their money by raising your APR rate after the sixth month and still be within federal regulation guidelines.

3. Will not be able to charge fee for going over credit limits unless the consumer agrees to pay the fee and must apply any amount of payment over the minimum to the highest interest rate balance first.

Now please be aware. This is not saying that you have total control over whether you are subjected to over the credit limit fees. What this is saying is that you as the credit cardholder must give consent to pay the fee. Consent can be given in a number of ways: Through a new terms and agreement statement that is revised and requires you to hit the “I accept” button when you login online to view your statements or make a payment. It can also be given when you call into customer service and you listen to the monotone automated lady-person or the Indian rep Akbar Jason ramble so quickly that you have to repeat it your damn self–language and all! Be mindful and take a moment to read everything and listen closely to keep yourself out a credit crunch.

4. A credit card company will not be able to raise the APR rate on your account with them, just because you are delinquent on other existing credit card accounts.

Here’s a visual: You owe Amex $3,500. You have been delinquent with Amex for the past three months but just got back into paying regularly. They pull your credit report and see that you also hold various Visa accounts and a Discover account that are in  trouble as well. Amex cannot choose to raise your APR rate because of this. Under the deregulated rules, yes. Beginning in February 2010 credit card companies no longer have the power to do so. You deal with one company at a time on separate issues.

Big Change: Consumers facing rate increases will have the right to cancel their card and pay it off over time at a lower rate if they choose to do so.

This is by far being lauded as the biggest change under the Credit CARD Act. If credit card companies devise new devious tactics to sneak in rate increases ( which I’m sure they will) you have the right to cancel your account with them and request to pay it off at a lower rate. This provision is somewhat in place now, however there are a few kinks and bugs with the current system. Starting February 2010, federal regulations will mandate this provision.

Now please be aware, with all of these new required changes, credit card companies will be working behind the scenes to develop new ways of making their money. After all, their primary source of revenue is through late fees, over the limit fees and finance charges. For examples, Citi is in the process of informing some cardholders that an annual fee of $30 will be added to certain accounts. Likewise, Amex has upped its late payment fees to $19 for balances under $250, and $39 for balances over $250. Prior to this change fees were $19 for balances under $400 and $38 for balances over $400.

While the Credit CARD Act looks and sounds good on paper, time will tell how effective it will be in protecting the rights of credit cardholders. Please check back next week for tips and tricks on what YOU as the consumer can do to protect your rights.

Article by Jenifer Moore

Jenifer serves as Editorial Director for The FreshXpress. A native of the Queen City, writing is her muse and she thrives on the Public Relations scene. While she is a lover of all music, she lives by the Biggie mantra "Sky is the Limit".

Jenifer has written 53 article(s) for us.