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New Credit
Card
Rules - effective 2-22-10
The Credit Card Accountability Responsibility
and Disclosure Act (CARD Act) set forth new rules
for credit card issuers (banks) that are the most consumer-protective in the
history of credit cards. Unfortunately it took so long for
this Act to be approved that credit card issuers were able to devise
loopholes. Here is a summary of this new Act:
Right to Reject.
Pre-approved cardholders can
reject any credit card (before activation) without
hurting their credit.
Everlasting Gift Cards.
Gift cards no longer expire & dormancy and inactivity
fees cannot be charged.
45 Day Notice of Increased Interest Rates.
Increased interest rates cannot be retroactive.
Must give 45-day notice of pending rate or fee hikes or any other
significant changes to credit card terms. Cardholders can cancel their account before new
(significantly higher) interest rates
take effect.
Finance Charges & Interest-Rate Hikes.
No rate increases for the first 12 months.
A six-month minimum promotional-rate period.
Rate increases can only be applied to new charges.
Annual and application fees cannot exceed 25% of the initial
credit line.
No more double-cycle billing.
No more over-limit fees, unless the cardholder opts in.
No fees to make credit card payments online or over the phone,
unless you make a payment on your due date.
Exceptions, Caveats, Loopholes.
Rate hikes are allowed if you're more than 60 days late.
Some banks have already found a way around the rate-hike issue, by
increasing card users' regular interest rates to as high as 29.9%
and then refunding a part of that rate for each month that the
customer pays on time.
Double-cycle billing, although prohibited, can technically still
exist for credit cards that don't have grace periods.
Issuers have been calling consumers asking them to opt in for
over limit fees in exchange for lowering that fee.
Billing Statements, Payments &
Disclosures.
Billing statements
must be sent 21 days before due date.
Your due date should be the same date
each month.
Payments are considered on time when
received by 5 p.m. on the due date or
the next business day after a holiday or
weekend.
Payments above the minimum must be
applied to the highest-rate balance
first.
Each monthly statement must include
information on how long it would take
you to pay off your balance if you make
minimum payments only and the total
you'll pay, including interest and
principal; and how much you need to pay
each month in order to pay off your
balance in 36 months and the total
you'll pay, including interest and
principal.
Statements must also include a warning
that by making only minimum payments you
will pay more interest and it will take
you longer to pay off your debt, as well
as a toll-free number to call if you
want to be referred to a
credit-counseling service.
Exceptions, caveats, loopholes.
If you make a purchase under a
"deferred-interest" plan (such as "No
interest for six months," for example),
the company may let you choose to apply
extra amounts to the deferred-interest
balance. Otherwise, for two billing
cycles before the end of the promotional
period, your entire payment must be
applied to that balance.
College
Students and
Young Adults.
No credit
cards for
students
under 21 unless
co-signed by
a parent or
they can
demonstrate
ability to
pay.
No
credit limit
increases if
you are
under 21 and
have a
co-signer
without that
co-signer's
permission.
No
credit card marketing and students are
not required to fill out applications to
receive freebies.
Colleges must post any
affiliation on their website with a bank
offering credit cards to students.
Exceptions, Caveats,
Loopholes.
Issuers will
likely start
appealing to
parents to
co-sign
their
children's
credit
cards.
The Federal
Reserve has
specified
that card issuers
have the
option of
keeping the
parent on
the hook
even after
the young
person turns
21.
Issuers
are still
allowed to set up
shop near
popular
off-campus
venues and
offer
freebies to
everyone,
whether or
not they
apply.
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