How New Credit Card Rules Affect You

New credit card reform laws went into place today, Monday, Feb. 22, 2010 which will result in big changes in card fees, interest rates and contract terms. Experts say the new laws offer consumers more protection, but unfortunately, the reforms will also likely drive up the cost of using credit for everyone — even those who’ve always played by the rules.

The Credit CARD Act of 2009 was signed into law by President Obama on May 22, 2009. Read our blog post: Sweeping Credit Card Changes Give Consumers More Protection.

Some say that folks with good or excellent credit may see deals and offers pop up in the post–reform credit card market as card issuers compete for the best customers, but that consumer pool is going to be very small. If you’re someone with marginal credit, those opportunities will not be there. Other experts say these reforms will make getting a credit card very difficult to nearly impossible for low-income consumers or those with poor credit scores, and it will make the upfront and overall costs of using a credit card higher for everyone.

Here are some of the key changes you will see after Feb. 22:

• Card issuers are now limited to how and why they can increase interest rates and accounts are protected against interest rate increase for the first year. For example, retroactive interest rate increases on existing card balances are no longer allowed.
• Consumers will be given more time to pay their monthly bills — at least 21 days after the bills are mailed or delivered.
• Credit card issuers must issue clear due dates and times for payments — no more arbitrary deadlines such as before 5 p.m., weekends, holidays, or when the card issuer is closed for business.
• Consumers must opt in to over-the-limit fees. Those who opt out will have their transaction rejected if they exceed their credit limit.
• Young people must get an adult to co-sign with them for a credit card until they are 21 years old.
• Fees for sub-prime cards can’t exceed 25 percent of the available credit limit in the first year of the card. (Note: some issuers are now considering charging exceedingly high interest rates on these cards as a replacement for these fees. Read CreditCard.com’s article, Issuer of 79.9% interest rate credit card defends its product.
• Card issuers must give greater advance notice of changes in credit card terms and the right to opt out of significant changes in terms on their accounts.

Here are some of the key things the new reform laws don’t cover:

• There is still no cap on how high interest rates can go.
• Card issuers can still raise interest rates on future credit card purchases.
• For accounts that are based on variable APRs, the interest rate can go up as the prime rate goes up.
• Business and corporate cards are not covered under the CARD Act.
• Card issuers can still continue to arbitrarily close accounts and cut your credit card limit without advance notice.
• Some card issuers are launching “new fees” not specifically banned by the new reform laws.

For a full, comprehensive guide to changes that will take place from the Credit CARD Act, click here.