On August 22, 2009, the first new rules of the Credit CARD Act of 2009 stepped into effect. Here are the highlights of the new provisions and what they mean for cardholders:
More Advanced Notice.
Going forward, banks must give cardholders at least 45 days notice if they make changes to interest rates or credit card fees; or if they increase your minimum payment or change a fixed interest rate to a variable interest rate. The notice previously required was only 15 days.
What it means. Having more advance notice, particularly on minimum payment increases, gives cardholders more time to plan. Unfortunately, the law doesn’t require card issuers to give notice if they cut your credit limit or close your account, two essential pieces of information for cardholders to have prior notice of.
Opt-Out Option.
Cardholders will have the option to opt out of future interest rate increases. However, when they do so, their credit card account will be closed for new charges, and cardholders must pay off the remaining balance (at the current interest rate) within five years.
What it means. While it’s nice to be able to opt out of interest rate increases, this is not an option for consumers, who can’t afford to lose their credit card. In addition, because the balance has to be paid off within five years, cardholders who opt out will see their monthly payment go up to double the current payment, or higher.
More time to make payments.
Going forward, the payment due date on credit card bills must be at least 21 days after the statement is sent out. Before, credit card companies sent statements out as little as 14 days before the due date, leaving very little turn-around time for cardholders not receiving their statements until five to six days after it was mailed.
What it means. The extra week provides cardholders with an extra cushion of time for paying their bill—but don’t’ think of it as an extra week to wait before you pay your bill.
Cardholders will have to wait another six months before the main provisions of the new Credit CARD Act step into effect on Feb. 22, 2010; the final provisions of the law won’t be effective until Aug. 22, 2010. The provisions yet to step into effect include restrictions on card issuers ability to increase credit card interest rates, curbs on their ability to charge over-the-limit fees, rules for how the monthly payments are applied, and new rules for issuing credit cards to people under 21.
