Manage Your Plastic: Credit Regulations Take Effect Today
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New credit card laws coming into effect today will implement a more sensible way for card issuers to manage their credit risk. Instead of “arbitrary rate increases, exorbitant fees and murky calculations of interest charges,” card companies must now be clearer in their terms of agreement, reports McClatchy-Tribune News Service.
The Credit Card Accountability Reponsibility and Disclosure (CARD) Act, which was signed by President Obama on May 22, 2009, changes how interest rates are charged. Previously, a credit card company could increase its rates and apply them to existing balances. But now, rate changes will only apply to new charges. The CARD Act also states that credit card companies can’t raise rates within the first year of a new account. Such changes make credit more expensive and harder to reel in.
In response to the new law, credit card companies have already “introduced a host of new fees and rate structures to recoup some of the revenue they will lose under the new rules,” reported McClatchy. They are also closing inactive accounts. So be sure to carefully read any mail you receive from your credit card company instead of tossing it in the trash (yup, it's something we're all guilty of).
While the CARD Act isn’t a cure-all, it’s certainly a good start. According to McClatchy, it will “save cardholders billions of dollars and usher in, for many, a welcome new era of tougher industry scrutiny from lawmakers, regulators, consumer advocates and customers.”
Other sweeping provisions include:
Regulation of fees issued by the card. Charges such as annual and application fees can’t be more than 25 percent of the credit limit guaranteed. The effect: protects consumers from high charges to get cards, even ones with low limits.
Consistency of payment due date. The effect: makes it easier to remember when a payment is due when it falls on the same day each month.
Restriction on issuing cards to those under 21 – a parent or adult must co-sign. The effect: protects young consumers from falling into credit holes.
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