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What Is In The New Credit Card Law For You?

In May of this year, President Obama signed into law The Credit Card Accountability Act.  While most of the provisions do not kick in until next year, some became effective this past week. The majority of consumer protections such as limiting when interest rates can be increased, banning universal default and double-cycle billing, and restricting credit cards for minors, among others takes effect Feb. 22, 2010.  More than 70% of U.S. households have at least one credit card and more than half of cardholders pay their balance in full every month, according to the Federal Reserve.


1.  45 Day Notice Rule

Credit card issuers must now provide 45 days notice before making any ‘significant changes’ to your account.  The only problem with this is that substantive issues such as closing your account or cutting your credit line are not considered ‘significant’ and the new rules do not apply to these circumstances.  You must be given 45 days notice of an increase in your interest rate (but there are no caps on how high the rate can go).  The new rules also prevent a credit card company from applying a rate increase to your existing balance (unless you are delinquent).  Are you starting to see what is happening here? (Looks like a lot of loopholes and very little real change).  By the way, if you are 60 days or more late you get no notice and your rate can be raised an unlimited amount (capped by your state’s maximum).

2.  21 Day Billing Rule

A payment can not be counted as late against you unless the credit card company mails your bill at least 21 days before the due date of the payment.  You should be aware that many credit issuers plan to shorten their billing cycles to adjust for the longer 21 day requirement (was previously 14 days).  This means that if you are someone that throws your bills into a stack and only looks at them at the end of the month, you may find yourself becoming late on your credit cards.  For many people, this will result in mailing out your payment within a week or 10 days from when you receive it to be sure to avoid late fees.

3.  Right To Cancel Card Before Rate Increase

You will now have the right to cancel a card rather than agree to a higher interest rate or any new fees.  Keep in mind that you are only able to keep your current rate if your account does not become delinquent (60 days or more late).  This also would not apply to rates that were disclosed to be for a specific period of time (such as the first 90 days, etc…).  Once you contact the credit card issuer to officially ‘opt out’ of any fee increases you will no longer be able to use your card.  It is still widely expected that changes to credit card terms will be included in the ‘fine print’ and probably not noticed by most consumers.  You must now take special care to read what might appear to be junk mail so you can invoke your right to opt out of any increase in fees.  It should also be noted that you will not be able to opt out of a rate increase on a variable card so long as the formula does not change.  Variable cards are tied to an interest rate index such as the Prime Rate or The Fed Funds Rate.  So, if the index goes up your rate can go up (without notice).  If, on the other hand, the credit issuer decides to change the formula (example: Prime Rate plus 6 instead of Prime Rate plus 5), you would have the right to opt out since this is an actual change to the rate calculation. 

4.  Want To Shop For A New Card? has a very good credit card search tool and provides an excellent side-by-side comparison.  Your best option may be to simply fire your current credit card company and take advantage of a better deal elsewhere.

Do you have a credit card horror story?  Please share it in the comments section below.

Helping you make the most of God’s money!

James L. Paris
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