The Credit Card Accountability, Responsibility and Disclosure, or Credit CARD Act of 2009 will bring about sweeping changes in the credit card industry.
The new reform might bring about a greater transparency and easier-to-understand terms, but at a higher cost. Industry analysts claim that the new law will make credit cards more expensive for all users and unaffordable for the mid-level income group and people with bad credit. Let us understand what this reform means to you as a consumer.
Limited increase in rate:An increase in rate on your existing balance can happen only if a promotional rate ends, you make a late payment or you have a variable rate card. New transactions will have a stable rate throughout the first year. Your credit card issuer will have to give you 45 days’ advance notice before making any changes to the rate of interest, or any other “significant” change in terms, such as an increase in fee.
Over-limit with permission: Your credit card company has to take permission from you if any transaction made by you gets you over your account limit. With this change in policy, there will be a limit to your expenditures and you will be able to keep a proper track of the bigger transactions.
More time to pay off: You will get a considerable time of minimum 21 days, to pay the monthly bill from the time of receipt. Due dates will become consistent and cannot be altered every month. There is a stop on the week-end and mid-week payment deadlines. This will help those of you, who have decided to consolidate your debts or enrolled in a debt management program. You can conveniently keep aside a pre-estimated amount towards your debt settlement / consolidation and your monthly credit card bill before a fixed date.
No card for you if you are under 21 years of age: If you are under 21 years and do not have an income, you will require a co-signer in order to get a credit card for yourself. This rule is brought forth in order to curb the young population plunging into deeper debts everyday.
Fair payment allocation: Previously the credit card clauses were such drafted that payments were allocated to the lower-rate balances first. This has been changed with the new Credit Card Act. Now it is a mandate for above-the-minimum payments to be allocated first to the credit card balance with the highest interest rate. This will help you pay off your outstanding balance faster and cheaper.
Validity of gift cards: The new act gives an advantage to gift card holders with an increased validity of minimum five years. The issuer cannot charge inactivity fees unless the card has been lying unused for 12 months.
Clear terms in customer friendly verbiage: All terms and conditions of the card must be explained in clear language before a card is issued on your name. You will be given all details before and after opening an account so that there is no misinterpretation of the terms. This will help increase your awareness as a consumer and prevent credit card companies deluding you with extra charges and conditional fees.
Notification of any changes made to your credit statement: The credit card issuer has to explain to you the total duration and the interest cost you will incur if you pay only the minimal monthly due. Your payment amount and interest cost for the normal monthly payment that you make must also appear clearly in the statement.
No more double cycle billing: With the new credit card reform act, the practice of piling charges on the current and previous balance (double cycle billing), has been banned. Now you will not be charged interest on debt which you have already paid off the previous month.
The credit card reform will certainly change the financial milieu of the credit card industry, but they will not ensure to protect card users holistically. Card issuers can still increase interest rates in future card purchases and there is no cap to how high the interests could soar. Business and corporate credit cards are not covered under the CARD Act. As a consumer, you have to be aware of every change that takes place and avail the benefits, if any, that are applicable to your account. Sensible use of your credit card will help you maintain a healthy financial life.
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7 Responses
I think credit card companies need to be a lot tighter regulated in the UK – the practice of sending out cheques with obscene credit limits to people who have only just finished paying their balance down is financially inhumane.
Something needs to be done about this and the way banks structure the payments with interest / interest free money being apportioned – it’s scandalous the way they do it at the moment
Posted on March 3rd, 2010 at 6:46 am
credit card companies should reduce interest and financial charges.
Posted on March 4th, 2010 at 12:48 am
Credit limit is indeed a matter of concern these days. It is the issuers advantage, which appears to the consumer as a lucrative offer. Credit card debts keep piling up due to this. Consumers need to be more conscious and careful while taking out a new credit card, and even while using it.
Posted on March 5th, 2010 at 2:06 am
Credit card issuers normally set you up on a certain interest rate depending on your credit record and payment history. If you have maintained a proper payment routine, you can certainly negotiate with the issuers on the interest rate. There are several companies to offer you card, so you can always shop around for the best deal. Make sure that you read their terms and conditions carefully before signing on your account, so that you do not incur extra charges and penalty for reasons that you were not aware of.
In the current financial scenario, a complete slash on interest rates in the credit card industry, is not a possibility. However, as an individual, you can maintain a good credit record and avail lower rates of interest.
Posted on March 5th, 2010 at 2:21 am
In the UK the situation stinks. The only people that can now get credit are the people that don’t need it. We have a state-owned bank which taxpayers have given millions to that won’t lend out any money.
I’m not saying we should revert to the days of irresponsible lending and tempting people into debt with free gifts, but there should be some common sense return to affordable lending.
Posted on March 5th, 2010 at 3:09 am
i think credit limit and security are most important for now.
Posted on March 9th, 2010 at 7:58 pm
With the passage of time more and more companies are emerging into the credit market with additional benefits they are providing to its customers, so it’s become very necessary to make some reforms in the credit industry both for the benefits of the lender and borrower.
Posted on March 17th, 2010 at 6:18 am
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