Credit Card Fees Now Restricted by Congress

Card Providers Face New Limits on Interest and Card Charges

May 20, 2009 Asa Ghaffar

New congressional laws have been introduced to stop excessive credit card fees, high interest and further card charges. Discover how this legislation will affect you.

According to the April 2009 Nilson Report, US credit card debt stood at $972.73 billion at the end of 2008. High interest payments and 'surprise' credit card fees mean that millions of US consumers are now struggling with money problems. Whilst the Consumer Credit Protection Act offered consumers some protection, this new Congressional legislation imposes far stricter controls on credit card providers.

New Restrictions Facing Credit Card Providers

Congress has passed the Credit Card Accountability Responsibility and Disclosure Act of 2009 in order to control the unfair practices of credit card providers. They will now need to comply with strict legal guidelines prior to imposing punitive credit card fees, charging high interest rates or amending T&C's.

New Rules on Credit Card Fees and Penalty Interest

Financial institutions must not impose a credit card fee or penalty interest charge until the cardholder is a minimum of 60 days late with the minimum monthly payment. Card providers must also provide 45 days notice prior to increasing the rate of APR or changing T&C's.

High Interest Credit Card Debt to Be Cleared First

Payments will now clear the highest interest-bearing portion of credit card debt first. A number of credit card providers have been clearing low interest credit card debt first. Whilst a cash advance attracts a substantially higher rate of APR, this was previously settled last.

Credit Card Bills Must Be Sent Punctually

A bill must be sent a minimum of 21 days prior to do the date it is due. Furthermore, should a credit card provider receive payment before 5 PM on the due date, it is now considered to be settled. Some providers were previously imposing a credit card fee if payment wasn't received in the morning.

Credit Card Debt Prevention for Under-21's

• 21% of undergraduates had a balance of between $3,000 and $7,000 according to Sallie Mae's "How Undergraduate Students Use Credit Cards" report in April 2009.
• A quarter of college students surveyed in a US PIRG's 2008 Campus Credit Card Trap report said that they had paid credit card fees or an over-the-limit card charge.

No consumer under the age of 21 will be able to get a card unless a parent, legal guardian or spouse is the primary cardholder.

The Obama administration has passed legislation that will help prevent further credit card debt. Credit card fees, usury interest rates and unfair practices are now legislated against. Whilst money problems are unavoidable, these changes will stop credit card providers exacerbating matters for financial gain.

Readers that found this article useful may also be interested in identifying the best credit card deal, discovering how effective credit card debt settlement is or finding out how to avoid identity theft.

Sources

Lieber, Ron. (19 April 2009). "Consumers are dealt a new hand in credit cards." The New York Times.

Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.

The copyright of the article Credit Card Fees Now Restricted by Congress in Personal Budgeting/Finance is owned by Asa Ghaffar. Permission to republish Credit Card Fees Now Restricted by Congress in print or online must be granted by the author in writing.

Credit Card Fees