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New Credit Card Laws Protect Consumers

CARD Act places tougher rules on banks, creditors

Updated Feb. 22, 2010

The U.S. Government last year signed into law the CARD Act, which changes the way creditors do business with consumers. It’s a complicated law with many new rules, many of which are in effect now.

Here are some of the main changes in the law:

• It’s tougher for creditors to raise your interest rates.

Creditors can raise your rates only if:

  • You fail to pay within your 30-day grace period or your workout plan, or
  • Your promotional rate ends, or
  • There’s a major change in the economy

If creditors raise your rates they must give you a 45-day advance notice, with few exceptions. However, many creditors worked quickly to beat the clock. They might have already raised your interest rates before this law took effect.

• It stops two-cycle billing and universal default.

Let’s say you’re a month late making a payment. During that month you made other purchases. In the past, creditors could charge interest on both months’ worth of purchases. That’s two-cycle billing. Now, they can only charge you interest on the late, month-old balance.

Universal default is when banks raise your rates because you were late on an unrelated bill. Let’s say you’re late paying your Visa card. They might raise your rates. Then the bank that gave you a MasterCard finds out and they raise your rates, too. That second, unrelated rate change is now illegal.

• It’s harder for young people to get a credit card.

Minors under 18 can only get credit cards if they are emancipated under state law, or if their parent or guardian is the main account holder.

College students, whom credit card companies often target, must show income and credit history before they can get a card.

• Here are some basic tips for credit card holders:

  • Don’t max out your card.
  • Don’t apply for too many cards.
  • Pay your bills on time every month.
  • Review your credit report every year.

Read our detailed summary of the new credit card laws and many other summaries of important consumer laws in our 2010 New Laws section.

Call us at (800) 593-8222 for questions and concerns about your credit or any consumer-related needs.

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