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The New Credit Card Law

A new law went into effect on Monday of this week to put a stop to what many have called ‘predatory practices’ engaged in by the credit card industry.  I have mixed feelings about these kinds of laws.  I am very much a Libertarian and believe that the government should not be micro managing private enterprise, but the credit card industry has really gone too far in recent years.  The variety of fees they have invented, not to mention interest rates as high as 30 percent, all seem to have pushed Congress over the edge.  These changes appear to be very positive for consumers, but the cynic in me believes that the credit card industry will find a way to adapt to these new rules and still exploit consumers in the end (I hope I am wrong).

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).  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.  The new rules only apply to personal credit cards and do not extend to corporate card users.  So, if you have a credit card that you use for your business you won’t enjoy these new protections.

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.  Obtaining A Credit Card If You Are Under 21

It will become much more difficult to get a credit card on your own if you are under 21 years old.  Those under 21 will need a co-signer, or will be required to prove their income before being able to be considered for a credit card.  This section of the law was designed to stop aggressive credit card marketing on college campuses. 

5.  Over Draft and Over Limit Fees Restricted

One of the biggest complaints we have received at Christian Money over the last couple of years is about overdraft charges.  If you go over your credit or debit card limit by even a dollar, you would likely have been hit with fees, penalties, and over-balance charges.  In one example I recently read, a person exceeded their debit card balance by $6 and ended up with more than $400 in fees from their bank.  Many people (including me) wondered why the charge was just not declined if there was not available funds on a credit or debit card.  The reason is that banks and credit card companies have been automatically enrolling customers (without their knowledge) in their overdraft program.  Under the new law, you will have to opt in to any overdraft program. 


Read the New Credit Card Law in its entirety.

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James L. Paris
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