5 On Your Side

New laws affect credit card holders

Posted September 17, 2009

The credit card industry is in the middle of a major overhaul. Sweeping new laws went into effect last month, and other changes happen in February. What does it all mean for card holders?

If you pay with plastic too many times, that plastic might need to be cut into pieces, as was the case with Rebekah O’Connell’s clients.

As a credit counselor with Triangle Family Services, O’Connell said she hopes the new Credit Card Accountability, Responsibility and Disclosure Act will help keep this from happening to other card users.

Credit holders affected by new law

The law’s first changes happened in August, which requires a 45-day notification of a rate increase. That's up from 15 days. It also allows card holders to in a sense "opt out" of the higher rate.

“You have the right to basically cap the account, close it off and continue with the lower rate and pay off the existing balance at the already existing rate,” O’Connell said.

Also, instead of just 14 days, card issuers now have to mail your bill at least 21 days before it's due.

More changes happen in February. One big one is that interest rates can only be raised with cause such as the end of a promotion or because payments were late.

“With the new rules, any payment above your regular minimum payment must be applied to the highest interest rate on the card, and I love that,” O’Connell said.

The new law also bans what is called double-cycle billing. It's when banks use two months of your bill to calculate interest instead of one.

For example, let's say you had a balance of $1,000 in August, and then $200 in September. Using the Average Daily Balance method and a 12 percent interest rate, the charge on that $200 would be $1.64.

But with double billing, the two amounts are averaged, meaning you pay interest on $600. So the charge jumps to $4.93, three times as much. Come February, that's no loner allowed.

A couple of potential downsides to the act are that some industry experts believe to make up for losses, credit card companies will eventually raise interest rates for all customers and that some people just won't be able to get credit anymore. But most agree C.A.R.D. is an improvement in many ways.

“I may never think that the rules are strong enough when it comes to consumer protection. But trying to make the statements more clear, trying to give people real time to get the payments in, giving people fair notice … should help people better manage their account (and) make better decisions,” O’Connell said.

No matter what the law, O'Connell says there's one rule every credit user should follow: “If you can't afford it, don't charge it.”

The law also impacts younger credit card users. Those under 21 must now have a co-signer to get a card unless they can prove they have the means to make payments.

O’Connell also mentions a couple of downsides to the new law: interest rates are already up ahead of that change taking effect in February. Plus, experts believe banks will again charge annual fees to make-up for lost revenue.

13 Comments

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  • allanonofnc Sep 22, 2009

    MAY RAISE INTEREST! Obviously the reporter of these story doesn't have a credit card. Nearly every one of my credit companies has notified me that their default rate is increasing to 29.99+ percent. I pay 200% of my minimum amount each month and have a nearly perfect 800 credit score but I am still being hit with these same outrageous rates. I propose that everyone cancel their credit cards until these greedy, government money taking loan-sharks get the picture and start acting with integrity and ethics. Oh, and maybe stop the wholesale mailing of pre-approved credit offers! That might make sure that the one using the credit can PAY for it.

  • hihuwatlu Sep 22, 2009

    My credit is excellent and in the past month I've received noticed that 2 of my credit cards will begin to charge annual fees. My husband's credit line was decreased on one of his cards because "he didn't use it enough".

  • MillerB Sep 22, 2009

    ROFL...TarheelsDontLikeEdwards you are so funny. I know people like you hate to hear the truth, but here it is anyway. This law was being worked on way before Obama was elected for president.
    Personally, I could care less about the law, I use pre-paid credit cards. No interest rates, no late fees, no CC companies trying to give me the shaft

  • TheAdmiral Sep 22, 2009

    "The banks took our tax money, raised rates and reduced credit limits to those of us that were responsible with spending and payment"

    CHANGE WE CAN BELIEVE IN!

  • TheAdmiral Sep 22, 2009

    The fact of the matter is that they have the consumer over a barrel.

    If you pay the card of early - it hits your credit report negative. If you pay it and it is not enough because they play stupid little games with you such as change your accounts after your bill is printed - it hits your credit report negative.

    If you close the account out - it hits your credit report negative.

    So why pay? If it hits your credit report negative no matter what - then why bother?

    Even if you try to catch up - it still hits your report as negative.

    They have put themselves in a spot where smart consumers are telling them - change it or never get paid. Your choice.

    If they can change the terms - so can you.

  • prn13norm Sep 21, 2009

    The banks took our tax money, raised rates and reduced credit limits to those of us that were responsible with spending and payment. I have paid off two of my cards and am working on the third. When the third is paid off I will keep one card active, pay it off each month, use only cash for purchases and tell the banks to KMA!

  • DontLikeTheSocialistObama Sep 21, 2009

    One more failure from our Socialist President Obama.

    Since credit card companies can't raise rates and fees on those with poor credit scores, the credit card companies are now raising rates on those with high credit scores and charging them annual fees.

    Thanks Obama for one more Socialist program that hurts those who work and excels in our society and benefits those that don't work hard for a living.

    Another Spread the Wealth from the workers to the welfare drawers from our Socialist President Obama.

  • Blaow HowYaLikeMeNow Sep 21, 2009

    Funny how they have to make laws for these companies to treat you right. "I'd treat you worse, but, it's against the law." I agree my next card will be a Discover Card. They have been great.

  • carolinagirl19 Sep 18, 2009

    THEY SHOULD HAVE MADE THE LAWS EFFECTIVE IMMEDIATELY. THEN BANKS COULDN'T RAISE THEIR INTEREST RATES RIGHT BEFORE IT TAKES EFFECT LIKE THEY ARE ALL DOING. I THINK THEY WILL RUN THEMSELVES OUT OF THE CREDIT CARD BUSINESS. MORE PEOPLE WILL FILE BANKRUPTCY OR GO THROUGH THE DEBT SEVICES TO GET RID OF IT. TOO GREEDY!!

  • craziecrafter Sep 18, 2009

    Credit Companies are not going to take a loss, they will in the future charge yearly fees for the use of their card. Discover is the best card I ever had. They have kept my interest rate low and keep raising my limit.....kinda of scary!

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