Credit Card Rules Are Changing, Part 1

Some new features are worth paying attention to

Have you noticed a flurry of mailings from your credit card account providers lately? Since the first of the year, I’ve received many letters that all start the same way: “Important Notice of Changes to Your Credit Card Account Ending in xxxx.” Almost all of them are notifying me of higher rates on any balances I might carry. Since I never carry balances, I just briefly scan the brochure and duly file it away without a second thought.

This month, however, I will do more than just scan. The law on credit card accounts is about to change, and for consumers, that’s good news. The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, signed into law last spring, will take effect on February 22. The new law is lengthy (what act of Congress isn’t?), but a few features are worth noting.

First, credit card companies must give a 45-day advance notice before increasing your interest rate or other fees. This does not apply if you have a variable interest rate tied to an index or an introductory or “teaser” rate scheduled to expire. In addition, interest rates on newly opened accounts cannot increase for the first 12 months (again, unless you have a variable interest rate or an advertised teaser rate).

Another new feature is that the minimum payment due may increase, but it cannot increase by more than 100% at any given time. Also, account statements must be mailed 21 days before the bill is due, rather than the current 14 days, effectively lengthening the grace period for consumers.

But my favorite highlights of this new law are the provisions intended to change the borrowing behavior of consumers, nudging them toward more prudent use of credit. More on that next week.

By Deborah Hoskins, JD, CFP
The Wise and the Wary Blog