New Credit Card Law Helps Hard-up Consumers

Protection from Excessive Card Fees and Card Charges for Familes

May 31, 2009 Asa Ghaffar

President Obama has introduced new credit card laws to protect U.S. consumers from unfair card fees and card charges. Find out how these changes might help.

The Credit Card Accountability, Responsibility and Disclosure Act became law on 22 May 2009. This new credit card law is designed to protect vulnerable U.S. consumers from unjust card fees and card charges. The new rules and regulations seek to strike a balance between profit and profiteering.

Credit Card Law Now Prevents Retroactive Rate Increases

Unless the cardholder is 60 days late in making payment, the new credit card law prevents an interest rate hike on an existing balance. If delinquency becomes a problem, the provider must restore the rate to the same level as before once six punctual payments have been made. Interest rates cannot be increased in the first year and a promotion must be made available for a minimum term of six months.

Card Fee Restrictions

No provider can impose a card fee for making a payment via telephone or the Internet under the new credit card law. A payment towards credit card debt is considered to have been paid on-time if made on the last allowable day. It doesn't matter if payment is made by post or over the counter at a local post office branch as no late card fee can be applied.

New Credit Card Laws for Under-21's

According to Sallie Mae, 84% of students have a card and carry an average balance of $3,173. Credit card laws have been amended to afford under-21's with an inadequate income or a co-signer additional protection from credit card debt. Young adults get into serious debt early in life and it can be notoriously difficult to escape.

Higher Interest Credit Card Debt Cleared First

The new credit card law prohibits the practice of clearing low interest credit card debt. The most costly form of borrowing, such as a cash advance, must be paid-off first. This applies to all payments up-and-above the minimum monthly credit card payment.

Credit Card Statements to be Sent Sooner

All statements must be sent a minimum of 21 days prior to when payment is required. Providers only currently need to offer 14 days notice, but this is set to change on August 20, 2009. The objective is to reduce the number of late payment card fees.

Double Cycle Billing Prohibited by New Credit Card Law

A ban on double cycle billing is to come into force. New credit card laws will ban the practice of imposing card charges on the current and previous balance. This prevents the issuer from adding interest to a balance that may have already been cleared the previous month.

The new credit card law helps prevent the amoral practices of providers and restore a balance between the interests of big business and the consumer. Card fees and card charges can no longer be imposed at the complete discretion of a provider. Students under the age of 21 will no longer be struggling with money problems as a direct result of unmanageable credit card debt.

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

McFadden, Leslie. (29 may, 2009). "8 major benefits of new credit card law". The Boston Globe.

April 2009. "How Undergraduate Students Use Credit Cards." Sallie Mae.

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 New Credit Card Law Helps Hard-up Consumers in Personal Budgeting/Finance is owned by Asa Ghaffar. Permission to republish New Credit Card Law Helps Hard-up Consumers in print or online must be granted by the author in writing.

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