What is the Credit Card Act and Why You Should Care
The bankruptcy rate for seniors 65 and older has tripled in recent years with credit card debt being one of the chief motivators. With over 3 billion credit card offers being mailed in a single year it is no wonder that temptation leads some struggling seniors into debt. Caught between the lure of easy credit and some arguably sneaky tactics by a few banking institutions many seniors are finding themselves strapped with insurmountable credit card bills. While there is no substitute for the wisdom of living within ones means, the new Credit Card Act will provide some much need relief and reform.
This landmark law dubbed the Credit Card Act will place limits on interest rates and fees and require credit card companies to make changes to consumers’ statements. Americans should take note that some banks began hiking interest rates and adding fees to their cards just days before the new Act took effect (February 22, 2010). The Consumers Union urges all credit card holders to take a good look at their last statement for any such fees or increases.
Below is a breakdown of the changes that you should expect now that the Credit Card Act has been put into action.
End of interest rate hikes: Credit card companies will no longer be able to impose random rate hikes. Although, holders of variable interest rate cards can still expect their rate to change based on the market. Credit card companies will still be allowed to adjust the interest rate on cards with a balance that is 60 days overdue or more.
Rate protection: New credit card accounts issued after the Act’s start date of February 22, 2010 will be given a one year grace period. During that first year, creditors will not be allowed to raise interest rates.
Limit changes: Once debtors reach their credit card limit they will not be able to continue charging to the account. This will stop companies from charging over-the-limit fees and should also keep consumers from accidentally exceeded their limit and spending beyond their financial means.
Statement changes: From now on, your credit card statement will include a notation about the amount of time it will take to pay off your debt assuming the minimum payment is made each month (and no other charges are made to the account). Statements will also include information listing how much money you should send monthly if you wish to pay off the debt in three years.
Payment allotments: Now, when you pay more than the minimum monthly payment the additional money will be put toward the balance with the highest interest rate.
More notice: Credit card statements must be mailed at least 21 days before the due date and issuers must provide at least 45 day notice before they can make adjustments to rates and fees.
The goal of the Credit Card Act is protect both the public and the banking industry as well. Bringing an end to shady tactics and educating consumers about their credit debt is certain to be a win-win for everyone involved. This Act has the potential to bring about a real and lasting shift of power back to the consumer. Something that many Americans feel has been a long time coming.
