Credit CARD Act

The Credit Card Accountability, Responsibility and Disclosure (CARD) Act focuses on what your credit card company must tell you about your account. Here is a summary of key aspects of this law:

Advance Notice - Your credit card company must send you a notice 45 days before they can increase your interest rate, change certain fees or make other significant changes to the terms of your card.  If your credit card company is going to make changes to the terms of your card, it must give you the option to cancel the card before certain fee increases take effect. 

Months to Pay Off Balance - Your monthly credit card bill will include information on how long it will take you to pay off your balance if you only make minimum payments.  It will also tell you how much you would need to pay each month in order to pay off your balance in three years.

Late Payment Warning - Creditors must clearly disclose policies about late payments.  For example, “If we do not receive your minimum payment by the date listed above, you may have to pay a $39 late fee and your interest rate may be increased up to the penalty APR of 28.99%.”

Minimum Payment Warning - Creditors must clearly disclose the impact of making only minimum monthly payments on their balances. For example, “If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance.”

No Interest Rate Increases in First Year - Your credit card company can't increase your interest rate for the first 12 months after you open an account.  There are a few exceptions to this provision. 

Increased Rates Apply Only to New Charges - If your credit card company does raise your interest rate after the first year, the new rate will apply only to new charges you make after the rate changes.  If you have an existing balance, your old interest rate will apply to that amount.

Over-the-Limit Transactions - You must tell your credit card company if you want it to allow transactions that will take you over your credit limit. Otherwise, a transaction that would take you over your limit may be turned down.

Caps On High-Fee Cards - If your credit card company requires you to pay fees (such as an annual fee or application fee), those fees cannot total more than 25 percent of the initial credit limit.  For example, if your initial credit limit is $500, the fees for the first year cannot be more than $125.  This limit does not apply to penalty fees, such as penalties for late payments.

Protections for Underage Consumers - If you are under 21 years of age, you will need to show that you are able to make payments in order to open a credit card account.  Otherwise, you will need a co-signer to open an account.  If you are under 21 and have a card with a co-signer, you can't increase your credit limit unless your co-signer agrees in writing to the increase.

Payment Dates and Times - Your credit card company must mail or deliver your credit card bill at least 21 days before your payment is due. Your due date must be the same date each month, and the payment cut-off time can't be earlier than 5 p.m. on the due date.  If your payment due date is on a weekend or holiday, you will have until the following business day to pay.

Payments Directed to Highest Interest Balances First - If you have more than one account with the same credit card company and make more than the minimum payment, your credit card company must apply the excess amount to the balance with the highest interest rate.

Source – Federal Reserve