New credit card rules kick in
Posted
Aug 19 2009, 11:22 AM
by
Karen Datko
Rating:
A few provisions of the credit card reform or CARD Act take effect on Thursday, Aug. 20. You'll have to wait until next year for more substantive changes to the way credit card companies operate.
We're referring, of course, to major changes to federal laws and regulations governing credit cards, which won't kick in until February and next August. Because the fact is that credit card companies responded quickly to the passage of the CARD Act by:
Whew! Did we leave anything out? In other words, they're trying to squeeze every drop of blood they can from customers before the government restricts their ability to do that. (To see how widespread these activities are, read "Credit card holders unduly whacked?")
Here are the legal changes you can expect right now:
- Card companies must give consumers 45 days' written notice before increasing interest rates or changing other terms. That's 30 more days than many consumers have been getting, but it doesn't apply when the company is lowering your credit limit or canceling your card. Also, Kara McGuire of StarTribune.com reports:
If you make any purchases 14 days after you've received notice of an interest rate change, those purchases will be charged at the higher interest rate. So don't go on a charging spree thinking you're sneaking in under the wire.
- If they're changing the terms, they have to explain in that same notice that you can cancel the card and pay off the balance at your old rate over five years. (However, Kara warns, your minimum payment may go up, and closing an account that has a large balance can damage your credit score.)
- Card companies must mail or otherwise deliver a statement at least 21 days before it's due. That's an improvement over the current 14 days.
Big changes coming next year include limits on interest rate hikes and over-limit fees. For more about that, read this.
Why did Congress and President Obama give the card companies so much time to adjust to the new rules? The delay has been very costly to consumers.
Card companies said they needed time to prepare. But others don't buy it. "If credit card issuers need to make a change to increase the (annual percentage rate) or increase a fee, or anything that benefits them, they can do that very, very quickly, so I don't know why the government gave them so much time to make those changes," Bill Hardekopf, chief executive of LowCards.com, told McClatchy Newspapers.
Related reading:
Surprise! Your card's no good
Fixed-rate credit cards ‘a dying breed'?
Chase raises minimum payments on credit cards
Banks have declared war -- on you
