Tips to Understand What New Credit Card Regulations Mean for You

Feb 26, 2010, 5:25pm

The Credit CARD Act of 2009 came into effect this week, bringing dramatic changes to interest rates and fees for most credit card users. While many credit card reform advocates applaud the increase in consumer protections, many card users are still unsure what these new changes mean for them. The downside? Responsible borrowers lose good rates as companies make up for lost revenue. Financial Planner and Finance and Economics Instructor with the University of Phoenix, Morris Hamm, offers the following guide to understanding the new credit law.

1. Limited retroactive interest rate increases – Credit card issuers are only allowed to increase interest rates on existing balances under certain circumstances, and must require 45 days notice prior to any change. Conditions such as late payments or a promotional period ending would permit interest rate increases.

2. Greater Advance Notice of Changes – Credit Card providers are now required to provide 45 days notice of any changes to your account. Make sure to read all mail from your credit card provider because most notices will be sent through the mail.

3. Opt Out – Consumers now have the right to opt out of — or reject — significant changes in terms on their accounts, including interest rate increases. When a cardholder “opts out” they can close their accounts and pay off the balance under the old terms. They have at least five years to pay the balance under the original interest rate.

4. More Time to Pay Monthly Balances – Statements will be sent 21 days in advance, providing more time for cardholders to pay their balances. Payments are also now required to be due on the same day of each month.

5. Understanding Minimum Payments – Credit card companies must outline to cardholders the consequences of making only minimum payments each month, and detail how long it will take to pay off the entire balance.

6. Increased fees and limited rewards – Credit card issuers are bringing back annual fees and will be limiting spending awards.

7. Over-limit Fees – Customers now have to “opt-in” if they would like to be able to make purchases after their account balance reaches zero, preventing mounting overdraft fees.

To schedule an interview with UOP Instructor Morris Hamm to discuss these tips, contact Christina Vanskike at 916-448-5802.