The new credit card laws under the Credit Card Accountability, Responsibility and Disclosure, or Credit (CARD) Act of 2009 brought a number of significant changes into the credit cards sector. As the name suggests the aim was to improve customer disclosures and end punitive practices imposed by credit card companies on customers.
As a result there are a number of benefits in regard to the structure of rates and fees. The top ones are outlined below;
- Rate increases
Card issuers cannot raise debts on existing balances unless it was a promotional period which has expired, the client paid late by 60 days or more or the variable indexed rate increased. Rates cannot be raised in the first year after issuance and promotional rates have to last a minimum of 6 months. However, issuers can raise at any time any reason rates on new balances provided they give a 45 days’ advance notice.
If the rates were raised because the user had incurred increased rates due to failing the 60 day mark, the card issuer should restore the rate back to the lower mark once the user shows 6 months of consecutive on time payments.
- Fee restrictions
Another benefit is that card holders will only face over the limit fees when they allow the issuer to approve over-limit transactions. Even then, the issuers cannot charge more than one over-limit fee in a single billing cycle. There will be no fee charged to users when they are paying back their debt in time regardless of where the users pay their debt from.
Another restriction is the abolishment of fees on payments received by the due date or the next business day of the bank does not receive mailed payments on the due date. If the user pays at a local branch, the payment must be credited on that very day.
- Advance notice on contract changes
Unlike in the previous law used, where issuers could make key contract changes with an advance notice of fifteen days, the new law increases the period to 45 days. However, this does not apply to credit limit changes which can be slashed without prior notice unless the reduction will trigger a penalty like an over-limit fee.
The new rules do not also have a cap on the interest rates and the increased rate would be three times your current APR. It is thus important for clients to be reading correspondence from their card issuers and review new terms carefully.