First Phase of Credit CARD Act takes place today
The initial provisions of the Credit CARD Act go into effect today, giving consumers more notice on interest rate hikes, more time to receive their bills and the ability to say no to APR increases.
The more significant aspects of the bill, signed into law in May, don't go into effect until February of 2010. Those provisions include restrictions on interest rate increases and marketing credit cards to people under 21.
Three changes go into effect today:
* Issuers must now give a 45-day notice instead of 15 days before a rate increase. This gives the cardholder a chance to shop around or pay off the card.
"The extra month of notification is good for consumers but it is still our responsibility to notice these changes. Rate increases are fairly widespread right now, so pay attention to your bill inserts, email notifications, or the plain white envelopes in your mail. This is how most issuers will notify you about a rate increase," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. "This longer period also gives you time to shop around for a card with a lower rate and possibly transfer your balance to a different card. Keep in mind that balance transfer offers aren't as generous as they once were and most cards now charge at least a 3% fee for a balance transfer.
"Surprisingly, the CARD Act requires advance notification of a rate increase, but does not require advance notification if an issuer closes your account or decreases the credit limit on your card," says Hardekopf. "Cardholders are being caught off guard by these practices. The cash register is not a good time to learn that your card has been cancelled or that you have exceeded your limit. It seems that both of these changes should have been included in the bill."
* Monthly statements now have to be mailed to consumers at least 21 days before it is due. Previously, issuers could mail the bill 14 days before the due date.
"Don't look at this as an extra week to wait and pay your bill. Keep your regular payment schedule and be appreciative for the extra cushion to make sure your issuer receives it on time," says Hardekopf. "If you use this extra time to procrastinate paying your bill, you may forget and incur a costly late fee."
* The right to opt out of rate hikes and fee increases. Currently, many issuers allow consumers to opt out, but the CARD Act makes it mandatory.
If you decline the increase, you can no longer make new purchases with the card and you must pay off the balance under the existing rates within five years. If you opt out, you must let the issuer know in a timely manner by mailing an opt out letter to your issuer declining the rate increase. Send the mail registered receipt and keep a copy of the letter for your records. You will then pay off the balance at the original rate. The closed account will appear on your credit report.
The more significant aspects of the bill, signed into law in May, don't go into effect until February of 2010. Those provisions include restrictions on interest rate increases and marketing credit cards to people under 21.
Three changes go into effect today:
* Issuers must now give a 45-day notice instead of 15 days before a rate increase. This gives the cardholder a chance to shop around or pay off the card.
"The extra month of notification is good for consumers but it is still our responsibility to notice these changes. Rate increases are fairly widespread right now, so pay attention to your bill inserts, email notifications, or the plain white envelopes in your mail. This is how most issuers will notify you about a rate increase," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. "This longer period also gives you time to shop around for a card with a lower rate and possibly transfer your balance to a different card. Keep in mind that balance transfer offers aren't as generous as they once were and most cards now charge at least a 3% fee for a balance transfer.
"Surprisingly, the CARD Act requires advance notification of a rate increase, but does not require advance notification if an issuer closes your account or decreases the credit limit on your card," says Hardekopf. "Cardholders are being caught off guard by these practices. The cash register is not a good time to learn that your card has been cancelled or that you have exceeded your limit. It seems that both of these changes should have been included in the bill."
* Monthly statements now have to be mailed to consumers at least 21 days before it is due. Previously, issuers could mail the bill 14 days before the due date.
"Don't look at this as an extra week to wait and pay your bill. Keep your regular payment schedule and be appreciative for the extra cushion to make sure your issuer receives it on time," says Hardekopf. "If you use this extra time to procrastinate paying your bill, you may forget and incur a costly late fee."
* The right to opt out of rate hikes and fee increases. Currently, many issuers allow consumers to opt out, but the CARD Act makes it mandatory.
If you decline the increase, you can no longer make new purchases with the card and you must pay off the balance under the existing rates within five years. If you opt out, you must let the issuer know in a timely manner by mailing an opt out letter to your issuer declining the rate increase. Send the mail registered receipt and keep a copy of the letter for your records. You will then pay off the balance at the original rate. The closed account will appear on your credit report.
