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What you need to know about the new Credit Card Law

Submitted by strandslucia on Fri, 02/26/2010 - 10:12

If you have (or had) a credit card, at one point or another you’ve probably fallen victim to some sort of credit card fee or unfair charge on your account. I know in my younger years this has happened to me more times than I’d like to recall.

The government hopes to put a stop to some of these unfair practices with the Credit Card Act of 2009, which went into affect this past Monday. According to a statement from President Barack Obama:

“For too long, credit card companies have had free rein to employ deceptive, unfair tactics that hit responsible consumers with unreasonable costs. But today, we are shifting the balance of power back to the consumer and we are holding the credit card companies accountable.”

Cheers to that. Here’s a summary of what the new credit card reform means for you:

  1. Financial institutions need to provide 45 days notices before increasing your interest rate.
  2. Financial institutions will have to give you at least 21 calendar days from time of mailing for you to pay your bill.
  3. No more late fee traps such as weekend deadlines, due dates that change each month, and deadlines that fall in the middle of the day.
  4. Credit card companies have to apply excess payments to your highest interest balance first.
  5. No more "double-cycle" billing, which is when issuers use the balance in a previous month to calculate interest charges on the current month.
  6. Financial institutions have to obtain your permission to process transactions that would place your account over the limit. This will help you avoid over-limit fees.
  7. No more fees for gift and stored value cards unless the card has been inactive for at least 12 months. All fees will clearly be disclosed.
  8. Credit card contract terms will now be available on the Internet and must be disclosed in language that consumers can see and understand.
  9. You can now pay you bills online or by phone without additional fees.
  10. Issuers need to periodically display (on statements) how long it would take to pay off the existing balance – and the total interest cost – if you paid only the minimum due.
  11. Issuers also need to display the payment amount and total interest cost to pay off the existing balance in 36 months.
  12. Anyone under 21 year old must be able to show proof of income or have a cosigner to obtain a credit card. This is an important step in teaching financial literacy

A few points to also note:

  • The law does not limit how high interest rates can go.
  • The law does not apply to business or corporate credit cards.
  • The law is likely to result in higher interest rates, annual fees, and lowered credit limits for customers with bad credit.

If you’re interested in learning more about the new credit card legislation, check out these great resources:

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