Credit Card Rules: Good, Consumer Discipline: Better

Last month of August, some provisions included in the Credit CARD (Card Accountability, Responsibility and Disclosure) Act went live. The provisions were mainly focused on how credit card companies gave out their bills and on the consumer notices that they are required to provide if they are to change a credit card holder’s credit card agreement. Although these initial provisions are not as hard hitting as most credit card holders would have liked, they do offer a degree of protection to consumers.

The activation of these provisions signals the start of the complete renovation of the credit card industry. Many industry watchers believe that the Credit CARD Act will radically modify the current landscape of the credit card industry. Credit card holders can only hope that many of the changes will be in their favor. The activation of the provisions also bring to mind how well these credit card rules will actually be able to protect the interests of credit card holders.

However, even as credit card holders look forward to a setup of legal provisions aimed at protecting them from credit card debt, a number of industry observers are saying that these legal provisions may not be enough. True, the Credit CARD Act will help in cleaning up the act of credit card companies. However, it is fair to say that a large part of the responsibility for the credit card crisis lies on the credit card holders themselves. Even as provisions are introduced to protect credit card holders, ultimately it is the credit card holders who decide how good or how bad their credit becomes.

A good example is the provision requiring credit card companies to mail credit card bills 21 days before they become due. The former requirement was only 14 days. This gives credit card holders an extra 7 days before their due dates. The benefits are obvious. With 7 more days of leeway to receive their bills and prepare the payments for those bills, credit card holders are more likely to pay their bills on time. However, if the credit card holder does not take the time to check up on his bills, then that 7 day increase would have been for nothing.

A new provision was also activated which would require credit card companies to inform credit card holders 45 days in advance if their interest rates would be increased. Along with the notice would be information as to how a credit card holder can opt out of the deal. This would usually mean that the credit card holder will cancel his credit card and pay off his debts within 5 years. The advance gives the credit card holder to decide to opt out or to shop for a better card. Again, the benefits of this provision depends greatly on whether a credit card holder will act on it and his self-discipline to stay the course.