Starting on Monday, February 22, new credit-card provisions from the 2009 Credit Card Accountability, Responsibility and Disclosure (CARD) Act will take effect. These changes are expected to save cardholders a collective $10 billion in annual fees, according to a new study released by Pew Trust's Safe Credit Cards project. They will also make it easier for consumers to navigate the confusing world of card issuers' fine print and sudden rate hikes.
Back in May, when the CARD Act was passed, my colleague Anthony Catalano explained 10 things every consumer should know about these new changes. Months later, two rules are already in place. Cardholders now have 21 days to send their payments in instead of 14. Card issuers are also required to give cardholders a minimum of 45 days notices if their term changes, rather than only 15 days. This, however, excludes credit-limit deductions. If an issuer reduces your credit limit, it is still permitted to do so without warning.
Today, we'll take a closer look at the changes that will take hold on Feb. 22. Here's how you'll benefit from the new legislation (the good news), as well as some credit traps to look out for in wake of these new rules (the not-so-good news).
1. You'll gain a clearer perspective.
Starting on Monday, credit-card bills are required to state how long it will take you to pay off your balance. You will also be informed about how much interest you will pay if you only pay the minimum due each month.
2. Your interest rate on your current debt won't budge.
Ever since the CARD Act was passed, card issuers went to town, relentlessly raising fees and interest rates while they still had the chance to. Starting on Monday, banks will no longer be able to touch the interest rate on your existing debt, unless your APR is variable and is tied to an index or you're 60 days late on a payment. In the event that a card issuer raises your interest rate for new transactions going forward, the 45-days' notice rule, as mentioned above, must be honored.
3. You can talk to your card issuer for free.
In the past, cardholders were charged for payments made over the phone, by mail or by electronic transfer. You can now say goodbye to those extra fees, as the new rules prohibit these charges.
4. Your existing balance is protected from universal default.
A cardholder's interest rate will no longer be raised on existing balances due to records for unrelated accounts, like utility bills.
5. Under 21? Good luck getting a credit card.
New rules make it much harder for those under age 21 to get access to credit. When consumers under the age limit apply, issuers must request proof of adequate income or a co-signer. Card issuers are also no longer allowed to set up shop on college campuses and hand out freebies to lure young students.
6. Your due date will actually be the same day every month.
Finally, the tricky 28- or 30-day cycles that make it so easy to forget about a payment are going to be banned.
7. The best cardholders will be dinged
. Now, here comes the beginning of the bad news that accompanies these new changes. Parts of the CARD Act encourages issuers to treat the best cardholders the same as the worst. That means that even if you’ve never missed a payment and have near-perfect credit, you too can be hit with annual fees and see features like rebates and airline miles being reduced.
8. You'll receive fewer rewards.
Overall, rewards are expected to take a hit with the new rules. That's because, simply put, these new changes are costing issuers. Banks will have to cut costs to save money. Some of the first things that may go: generous airline miles, rebates and other perks.
9. Beware of hidden fees.
The new law sets no restrictions on the types of fees issuers can pass on to cardholders. As a result, pay close attention to the "Terms and Conditions" section of your agreement to stay in the know on new and unexpected charges.
10. It"ll be tougher to get a card.
Credit is expected to tighten even more after new rules take hold. Issuers may implement stricter underwriting practices, requiring prospective cardholders to divulge more information on income and proof of savings.