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The CARD Act: What do the new regulations mean for you?

Credit Cards
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Limited interest rates hikes. 45 day advanced notification for most fee changes. No interest rate increases for the first 12 months of holding an account. These are just a few of the new changes to the card industry.  In short, The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (the Credit CARD Act), which came in to effect today, is aimed at preventing banks from sneakily raising interest rates and changing terms on an account, which ultimately lead consumers deeper into debt.

Some of the key features of the CARD Act include:

  • Limited interest rate hikes: increases in interest rates on existing balances will be limited to specific conditions, including the end of a promotional rate period, variable rate changes or if the cardholder misses a payment
  • Minimum 6 month promotional interest rate period
  • 45-day advance notice required for most fee changes, including pending rate or fee increases
  • Issuers must notify card holders of the right to cancel a card (“opt out”) if the holder doesn’t agree to changes in the terms of the account

Young Adults:

Young adults under 21 years of age will need to have an adult co-signer to open a new credit card account, or show proof of income.

Poor Credit History:

Looking to apply for a credit card, but have poor credit card history? Beware. While the credit card act stipulates that upfront account-opening fees cannot exceed 25% of the initial credit limit, some issuers are considering absurdly high interest rates on these accounts, with one card company quoting a 59.9% APR

Corporate Credit Cards:

It’s important to note that the new laws only affect consumer credit cards, not corporate cards. If you have a business card, be sure to stay on top of changes in the terms and conditions of your card.

Once the new regulations are fully phased in by December 2010, the credit card industries marketing, billing and advertising will be fundamentally changed.  This also means the credit card companies will need to reign in their rewards programs and potentially increase annual fees.