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Credit Card Accountability, Responsibility and Disclosure Act (CARD) of 2009
On May 22nd, 2009 Barack Obama signed new legislation into law called the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit CARD Act). The law was supposed to force credit card companies to become more transparent with their fees, interest rates and other provisions, and create a more consumer friendly environment. Whether or not that will actually happen is still up for debate. As of yesterday, February 22nd, 2010, the law is now in effect.
Provisions Of The 2009 CARD Act
The bill looks to put some limits on what the credit card companies can do in regards to charging fees, upping interest rates,and in theory forces them to be more transparent with customers. Many believe it will significantly change the face of the credit card industry. Some of the major provisions include:
- Requires credit card companies to give cardholders 45 days advance notice of an increase in interest rates. (You can opt out of interest rate hikes, meaning you can repay at your current rate, but not make new purchases)
- Prohibits credit card companies from increasing interest rates retroactively on existing balances unless the cardholder is more than 60 days late in making a payment. If the cardholder pays on time for the following six months, the company will have to restore the original rate.
- Prohibits credit card companies from marketing and issuing cards to borrowers under the age of 21.
- Requires balances with higher interest rates to be paid first, instead of lower interest first as many companies do now.
- Permits consumers to set credit limits lower than the limit offered by the credit card company.
- Requires that statements be mailed out at least 21 days before payment is due.
- Card issuers can't charge customers extra fees to pay their bill unless it is an expedited payment.
- Card holders must give consent to allow card issuers to process over the limit transactions. Even with consent, only one over limit fee is allowed per billing cycle.
Side Effects Of The Card Act
A lot of people are saying that the CARD Act could have unintended consequences. Among them:
- Possible reduction in airline miles, bonus programs and cash rewards programs.
- New annual fees implemented where there weren't any before.
- Annual fees raised.
- Reduced rebates.
- Harder to get a credit card, even for those with good credit.
- Increased transaction fees for retailers (higher costs for consumers?).
All in all I think the legislation isn't necessarily bad, I just don't think it will help as many people as it's supposed to – and the banks will find ways around the new laws. A new day, a new scheme to make money.
Really want to cut out your worries about using credit cards? Pay cash instead!
What's your opinion of the CARD Act? Do you think it will be beneficial for consumers? Have you seen your rates at your bank go up? Have you gotten a barrage of new credit card fees and regulations pamphlets in the mail? Tell us your thoughts in the comments.