What You Should Know about the New Credit Card Rules

When Obama signed the credit CARD Act of 2009 into law, new changes were expected and true to the expectations, there have been some radical changes favoring the consumer from previous practices.

However, not everyone gains a lot since the underlying principles behind the law was to reduce the individual debt burden especially from credit cards. Thus, while the credit card companies faced a great deal of policy changes, the laws also affected the ease with which one can be granted a credit card.

Below is an overview of the major changes and how they affect you:

  • No more unexpected interest rates hike

This is one of the main highlights of the new law. Credit cards interest rates hike have been limited considerably. There are no hikes on existing balances unless you were late in payment or the new rates come after the end of a promotional rate. Even then, interest on new rates can increase only after a year. Furthermore, no significant change can be made on the terms of an account before a notice of the same has been given 45 days earlier.

  • A right to opt out

The new law gives card users a right to reject new account terms by ending their agreement with the card companies. In this case, an individual will simply close the account and pay off the balances under the old terms. The time for paying the balance is also fair to the consumer with five years being the minimal time.

  • At least 21 days to pay monthly bills

Monthly bills are another area that has benefitted from the new law in terms of extended periods. Prior to the law, there was no guiding regulation on when monthly bills are due. As a result consumers often complained about dates being changed and brought up with little notice. Now the bills are due 21 days after being delivered.

  • Limited universal default practice

Universal default is basically a practice whereby the credit card issuers increase interest based on the users’ credit history with other unrelated credit facilities. For those who had existing balances when the law came into force, this practice ended on those balances. Card issuers were given a limited allowance for applying universal default on future balances and only if they provided a 45 day allowance notice.

Other changes brought by the law include limited credit to young adults, clearer due dates and times and restrictions on over the limit fees.

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