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Final Phase Of New Credit Card Law Takes Effect

President Obama signed major credit card reform into law in March of 2009.  The initial elements of the new law were phased in last year.  In February, I wrote a comprehensive article addressing many of the details of the new credit card law.  This week marks the third and final phase in of the law.

1.  Late Payment Fees

Late payment fees will generally be capped at $25 and cannot be higher than the minimum required payment.  This means that you can’t be hit with a $25 late fee for making a $10 payment late.  Under the new rules, consumers who are chronically late may see late fees as high as $35 in certain cases.

2. Inactivity Fees Discontinued

Credit card companies can no longer charge you inactivity fees for not using your card.  This had to be one of the most ridiculous among the fees that the industry had come up with over the years.  The new rules appear to have taken care of this issue for good.

3.  Gift Cards

New gift cards cannot expire for five years. The five years begins either on the date the card issued or the date when funds are loaded onto the card. So-called ‘dormancy fees’ can only be assessed against a gift card if it is not used for an entire year.

Changes Already Phased In

1.  45 Day Notice Rule

Credit card issuers must now provide 45 days notice before making any ‘significant changes’ to your account. 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 cannot 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). 

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). 

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.

5.  Over Draft and Over Limit Fees Restricted

Banks and credit card issuers can no longer automatically enroll customers in overdraft protection programs that allow credit and debit cards to be used when the account balance will be exceeded.  Before the new law, a consumer could be hit with hundreds of dollars in overdraft charges resulting from exceeding their balance by just a few dollars.

Experts agree that credit card issuers will likely find new ways to charge consumers fees.  There is an immediate expectation of increases in annual fees and interest rate increases have already been occurring.  Credit card issuers are expected to begin to focus on consumers that use their cards frequently.  Those consumers with frequent transactions will be considered the new gold standard, as issuers begin to make more of their money on transaction fees charges to retailers.

Now is a great time to shop for a better deal on your current credit.  My favorite site to do that is

Helping you make the most of God’s money!

James L. Paris
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