CARD Act Provisions
The Credit Card Accountability, Responsibly and Disclosure Act (CARD Act) has many provisions that are designed to protect consumers using credit cards.
There are four provisions in which a credit card issuer may still raise your interest rates:
1. Advance notice of stepped rate: This allows for issuers to provide promotional rates for an initial period and then increase the rate as long as it matches the previously stated step up rate.
2. Variable rates: Card issuers may adjust the rate to match changes in prime rate, but they cannot increase the margin above that index.
3. 60+ days delinquent: Once you fall more than 2 months late, your creditor can increase your rate to the penalty rate indicated in your contract. To get your old rate back, you must bring the account current and make on-time payments for 6 months.
4. If you were on a workout (hardship) agreement and failed to comply with those terms, then your rates can be increased.
Some of the most important features of the CARD Act include fixed due dates, over limit opt-in, 45 days notice of changes to interest rates, rewards programs, and many other terms. Fixed due dates ensure that your credit card bill will be due on the same day every month in order to avoid moving due dates caused by 28 or 30 day billing cycles. Also, over limit opt-in arrangements now require credit card companies to decline over limit charges unless you choose to be charged additional fees for this service. If you’ve ever been charged a $29 over limit fee for a $10 purchase, like me, you’ll find this is one of the most important provisions of the CARD Act. In addition, credit card companies are no longer permitted to change the terms of your agreement without notice. You must now be given 45 days notice of any rate hikes, rewards program modifications, and several other terms.
Effects on Students, Professionals, and Businesses
There are also specific provisions for students, professionals, and businesses. Anyone under the age of 21 must opt-in to receive credit card promotional materials and they must have a cosigner or financial means to repay the debt. This can make it difficult to build credit before you’re 21, but it also makes it difficult to ruin your credit before you’re even out of school.
On the other hand, businesses and professionals are not covered by the CARD Act. This means that credit card companies can still change their rates at will and without notice. For this reason, many credit card companies have been promoting their business and professional accounts as a way to continue their past business practices that have proven to be so profitable for them. One way this is happening is by asking customers with personal accounts if they use their accounts for business and professional services. They are then offered the opportunity to transition into a professional or business account which is not covered by the CARD Act.
Year in Review
It has been just over a year now since the majority of the provisions of the CARD Act went into effect. Thankfully, “identity theft incidents were down 28% in 2010 from 2009, according to Javelin Strategy and Research.” This is attributed to declined fraudulent over limit transactions which would have otherwise been approved. However, there is still work to be done in order to further protect individuals. One area which was not addressed by the CARD Act is the ability for credit card companies to provide no advanced notice for credit limit decreases or account closures unless they are due to information found on your credit report. Additionally, the so called universal default process is still largely in effect. “So, if you miss a payment with your John’s Bank Credit Card, your Dave’s Bank Card can increase your rate. And, if your FICO score drops, for whatever reason, they can all increase your rates as well.” The only thing effected in the universal default process is the requirement of a 45 day notice prior to any rate increase.
In addition to Debtors Unite, Frank Jones writes on a variety of topics for Demand Studios, Associated Content, and Jones PC Repair. He is the kind of student who takes Chemistry, Calculus, and Statistics as electives. This same thirst for knowledge which has darted him between studies in Computer Science, Electrical Engineering, Culinary Arts, Philosophy, and Political Science, also pushes his writing and research into many areas of interest and expertise. Managing his own personal debt, rebuilding his credit, and the entrepreneurial spirit he inherited from his father has provided Frank with some practical experience which is backed up with his research in these areas. Frank is always looking for new adventures in education and travel which is why he will be spending the second year of his masters studies at UPF in Barcelona.