NDSU Extension Service - Ramsey County

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New Credit Card Rules

New Credit Card Rules

            The Credit Card Accountability, Responsibility and Disclosure (Credit CARD) Act of 2009 went into effect in February 2010 with some far-reaching effects on how credit card users and credit card companies interact.  Debra Pankow, with the NDSU Extension Service, reminds us of some of the major provisions of the Credit CARD Act.

Disclosure Requirements

  • Credit card issuers must provide consumers with 45 days’ notice (up from the previous requirement of 15 days) before changing key account terms, such as increasing interest rates and fees. This requirement does not apply to credit limit changes or interest rate caps, however.
  • Credit card issuers must display on billing statements how long paying off the existing balance and total interest cost would take if the card holder makes only the required minimum payments. Issuers also must display the payment amount required and total interest cost to pay off the existing balance in 36 months.
  • Credit card companies must provide on every statement a toll-free phone number and Internet address for cardholders to request payoff balances.
  • Creditors are required to provide a 30-day advance notice of account closure.

Interest Rates

  • Credit card issuers cannot raise a customer’s interest rate to a penalty or default rate (often 24 to 32 percent) because of late payments to another creditor on an unrelated account.
  • With the exception of clearly disclosed “teaser” rates or a change in the “index” (for example, the prime rate) used to calculate interest on a variable-interest-rate credit card, initial credit card contract terms must remain stable for an entire year before any changes are made.
  • So-called “teaser” rates (low initial promotional interest rates that last for a limited time) must be in effect for at least six months.
  • Interest rates on an existing balance cannot be raised unless payments are more than 60 days late or a teaser rate expires. If rates are raised and a consumer pays at least the minimum balance on time for six consecutive months, the previous lower interest rate must be restored.

Fees

  • Over-the-limit fees will be charged only if consumers give their permission for creditors to process transactions that would place the account balance over the approved maximum limit.
  • Credit card companies cannot impose more than one over-the-limit fee on a credit card per billing cycle.
  • Late-fee charges are prohibited when cardholders present proof that their payment was mailed within seven days of the due date.
  • Credit card issuers are prohibited from charging fees greater than 25 percent of a credit card’s credit limit.

Billing Traps

  • Credit card bills must be mailed 21 days before the bill is due instead of 14 days, as previously required.
  • Late fee “traps” such as weekend due dates, shifting payment dates and early morning deadlines are prohibited. Payment received by 5 p.m. on the due date will be considered on time.
  • Payments greater than the required minimum payment must be applied, in descending order, starting with the balance with the highest interest rate.
  • Lenders cannot use the balance from the previous month to calculate interest in the current month.

Gift Card Regulations

  • Gift cards cannot expire for the first five years after they are issued. Of course, card holders have no guarantees if the gift card issuer goes out of business.
  • Inactivity fees cannot be assessed unless a gift card has not been used for 12 months.

            As an alert consumer, remember that credit card companies exist to make money and will now be looking at other methods to do so.  Those might include increasing transaction fees, raising annual fees, reducing or eliminating grace periods, placing more restrictions on rewards programs, increasing annual percentage rates and lowering credit limits. Always read all bill inserts and other correspondence from credit card companies to be aware of changes in key terms, such as interest rates, required minimum payments and fees.

 

 

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