Nearly 80% of American families have at least one credit card and 44% of these families carry a balance on their card(s) each month. With this widespread utilization you would think that there would have been a tremendous amount of transparency in the policies and practices of the credit card industry. Unfortunately, this has not been the case.
In the last year, have you experienced a credit card interest rate increase, a fee you felt was unfair or a credit line reduction for no specific reason? If so, did you receive any notice or explanation why? Were you aware of your options when your interest rate was significantly increased? Did you realize that your credit scores were likely negatively affected by these changes? For most Americans the answers are not favorable. Many consumers across the United States feel as though they are held hostage to the credit card companies and deal with the lack of transparency as a “necessary evil”. To pour salt on the wound and highlight the magnitude of the challenge, it was reported that the credit card providers collect around $15 billion in penalty fees each year.
The good news is that the government is trying to help rectify some of the challenges noted above. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 — commonly referred to as the Credit CARD Act (“The Act”) was signed into law on May 22, 2009 and represents some of the most protective credit card consumer legislation in 60 years. Everyone who uses a credit card should at least have a basic understanding of The Act and how it could impact their personal situation and credit profile.
Effective August 19th, 2009, two key provisions of the law take effect. Until now, consumers were only given 15 days of notice if their interest rate was going be changed by their credit card provider. Now they must alert you 45 days prior to any change. For card holders who read their notices, this gives them reasonable time to call their creditor and “plead their case” for a better interest rate before it takes affect. If you have a good credit profile and they won’t reduce your rate then move your business to a competitor. Secondly, card holders will now have 21 days instead of 14 to make their payments. This is a real win for consumers who are fighting to keep on top of their bills and those who travel a lot.
The most significant portions of the law go into effect February 22, 2010. Here are a few highlights of those changes:
- NO UNFAIR CHANGES – Unlike today, credit card issuers will not be able to change your credit status at anytime, for any reason. So, if you miss a payment with one creditor, another cannot automatically increase your interest rate or drop your credit limit which often unfairly affects your credit scores.
- RESTRICTIONS UNDER 21 – Consumer under the age of 21 will need a co-signor or a job in order to get a credit card. This is designed to help control the number of young, college-aged students building up on credit card debt and negatively impacting their credit profile before they even graduate.
- OVER LIMIT FEE CONTROL – Credit card companies will no longer be allowed to let card holders exceed their limit without having the card holder’s permission to do so. Credit card companies make millions off the “over-limit fees” that range from $30-$50 per occurrence. If you have not agreed to allow over limit exceptions your card will simply be declined, protecting your credit score and protecting you from over-limit fees.
- LATE FEES – If your credit card provider charges late fees they must clearly disclose them on your monthly statement.
- CREDIT CARD AGREEMENTS – Changes occur so often that consumers don’t know which agreement is accurate. Creditors will now be required to have a copy of your credit agreement available for you on a website.
Americans need a healthy flow of credit in our economy. However, for too long credit card company practices have steadily grown unfair against the consumer. The Act takes a strong positive first step forward in creating transparency for everyone. Nevertheless, it is still critical to actively manage and monitor your credit profile to ensure you are fully aware of any changes.. For a complete summary of the Credit Card Act see the “Latest News” on the home page of www.approvalguard.com.
