New Credit CARD Act Rules' Impact on Credit Card Holders
by Jane McNamara, President & CEO, GreenPath Debt Solutions

On May 22, 2009, President Obama signed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act, which imposes consumer-friendly restrictions and requirements on credit card companies.

The new rules of the Credit CARD Act that took effect on February 22, 2010 will impact all credit card accounts in the United States. While many of the rules will benefit consumers, some may affect how they obtain and use their credit in the future.

One of the big changes that card holders are already seeing is the simplification of credit card terms. Many of our GreenPath clients, who were previously confused by pages of small-type that explained what their rights were as a card holder, now have a better understanding of interest rates, grace periods and more.

Overall, any changes that result in clearer disclosures, lower interest and fewer fees are positive for consumers.

Here is a list of key changes starting on February 22: 

• Credit card companies cannot increase interest rates on existing balances unless the account is at least 60 days past due. (Beginning in July 2010, account must revert to original interest rate after 6 months of on-time payments.);
  
• Credit card companies cannot raise interest rates because of being past due on other accounts. (known as Universal Default); 
  
• Credit card companies can’t charge overlimit fees unless the card holder has given them consent to extend credit beyond the card limit; 
  
• Statements must show how long it would take to pay the existing balance – and the total interest cost – if only the minimum payment was made;
  
• Young people under 21 years old can’t get a credit card unless they have a co-signer or proof of sufficient income; 
  
• Statements must include information about at least three nonprofit credit counseling companies for any consumers who have carried a balance within the past 60 days; 
  
• Credit card companies must honor promotional rates for at least 6 months;
  
• There will be limited fees on sub-prime, low-limit cards. 

However, the Act will have some negative effects for consumers:

• It will be harder for some people to get credit cards. 
  
• Spending limits and rewards may be lowered. 
  
• Minimum payments will be higher. 
  
• Cards that used to be free may now have annual fees.

What we must remember is credit card companies can’t solely be blamed for the financial problems of consumers. Individuals must take responsibility for using credit cards wisely, especially in this trying economic time, exercising discipline and self-control and not charging more than they can afford to pay.

As the new rules are enacted, consumers need to pay close attention to their statements. If they have questions, they should reach out right way to their credit card company, using the phone number or website listed on their credit card statement.

If people are having trouble paying their bills or are feeling stressed about their financial situation, they should contact a non-profit credit counseling company like GreenPath that can help them regain control of their finances.

When it comes to financial wellness, education and timely action are key in this economy. People shouldn’t feel embarrassed if they are in a bad financial situation. They need to take that first step in reaching out for help to ensure themselves a financially stable future.