2010 Kicks Off With Credit Card Accountability Bill: Card Holders Rejoice

Last year, the Credit CARD Act of 2009 became law. This year, this new credit law gets activated full force, though some minor provisions did get activated late last year. The bulk of this bill is scheduled to go live on February 22 and credit card holders are finally going to see some protection from the more abusive tactics of companies.

One of the changes that credit card holders can expect is a longer notice period for billing and for rate hike notices. For billing, companies have to send the bills 21 days before the overdue date. This will give card holders more time to come up with the money to pay for their monthly bill. For upcoming rate hikes, companies need to issue notices 45 days before new rates go live. Not only that, but they also have to allow card holders to opt out of the rate hike and inform them of this right. However, card holders who do opt out of any rate hikes will usually have their cards canceled, depending on the card issuer.

The ability of companies to raise interest rates arbitrarily is also going to get muzzled. As long as the card holder maintains a good payment history, companies can no longer raise interest rates except in the case when a “teaser” rate has expired or when a credit card has a variable rate interest. This particular regulation has been blunted by the recent move of a majority of credit card companies of switching their fixed rate credit cards to variable rate ones. For the now rare fixed rate credit cards, if companies do raise their rates, the higher interest will only be applicable to new purchases. Older purchases will still be paid according to the previous interest rate.

This new law isn’t all gravy for credit card holders, however. For instance, this new law severely punishes credit card holders who are fond of making late payments. Those who go over 60 days without paying their debts can see their interest rates go up even higher than it did before. One consolation though, if they are able to keep up with their payments six months straight, the credit card company has to reinstate their previous, lower rates.

One of the seemingly small changes that this new law brings, which could make a huge impact on credit card holders, is the increased credit card term transparency that it requires from companies. In particular, the law forcing card companies to inform card holders of how long and how much it will cost them if they keep paying only the minimum payments should make a large impact on the payment behaviors of credit card holders.