On February 22, 2010 the Credit Card Accountability Responsibility and Disclosure Act of 2009 took effect. The CARD as it is more popularly known, is a comprehensive credit card reform legislation that is meant to establish ?fair and transparent practices relating to the extension of credit under an open end consumer credit plan? and for other purposes. Even in the current political climate this bill pass both the House of Representatives and Senate with high bi-partisan support.
This bill outlines several provisions that are for the benefit of consumers. One of these important provisions is that consumers are now protected from arbitrary rate hikes. A credit card company must give a cardholder advance notice of 45 days before any interest rate increase. A cardholder then has the option to cancel their card and pay off the balance at the previous lower rate. Cardholders have up to 3 billing cycles to take advantage of this option.
Credit card companies can no longer charge interest on debt that is paid within the ?grace period?. This prevents the problem of ?double cycle billing?. A credit card company is now also prohibited from assessing fees on any interest-only balances of a cardholder. If a cardholder pays their bill on time, they have paid the principal for the billing cycle and they should not get any further fees on the interest portion of their balance.
If a consumer has been subject to a rate increase because of late payments or overdrafts, but they subsequently pay their bill on time for six consecutive months they will now get their previous lower interest rate restored. Creditors must also conduct a review of the payment history of the customer every six months to determine if a rate decrease is in order.
Cardholders should now be receiving their bills a minimum of 21 calendar days before the due date. Prior to card the requirement was just 14 days. If a payment is made before 5 p.m. EST on the due date it is considered timely. The due dates are now required to fall on the same day every month, with the delay to the next business day if it happens to fall on a weekend or legal banking holiday.
All terms and conditions of the card should now be included on every statement is a minimum size font that improves readability. There should no longer be any ?fine print?. Also, the information on how to contact your credit card company for information regarding your account will be included on every statement.
Consumers also have the option of having a fixed credit limit of their choosing that cannot be exceeded and credit card companies can no longer charge over-the-limit fees on a cardholder with a fixed credit limit. Any payment beyond the minimum payment now must be applied to the debt with the highest interest rates first.
The CARD act also has many other positive aspects. The law was designed to protect consumers for the arbitrary and unfair practices by the credit card companies in the past and most consumers will experience the benefits of this new law.