CARD Act: Credit Card Law Changes Rules for Industry

The CARD Act, a law regulating the credit card industry, went into effect in February 2010. This Credit Card Accountability, Responsibility and Disclosure Act has brought about big changes for American consumers and credit card providers, with the intent of eliminating unfair treatment and empowering people to take control of their finances. According to Kenneth J. Clayton, senior vice president at the American Bankers Association trade group, “Many practices that frustrated customers have been eliminated, and credit card users will now benefit from greater control and clearer terms for their accounts."

Significant restrictions of the CARD Act have to do with raising interest rates. Card issuers are not allowed to hike interest rates the first year a card is issued, and rate hikes cannot apply to existing balances, except under limited circumstances.

The practice of raising a consumer’s annual percentage rate (APR) without giving much notice for infractions, such as missing a cell phone payment, is no longer allowed. Card providers are required to give at least 45 days' notice before raising rates, and they have to allow consumers a chance to rectify the situation or opt out of the rate hike. The CARD Act also bans a practice known as double-cycle billing, in which credit card issuers charge interest over two billing cycles rather than one.

Limitations on certain fees are another major component of the CARD Act. Banks and other card issuers are no longer allowed to charge hefty fees when consumers exceed their credit limits. Fees typically charged up front to people with bad credit are also limited. Finally, shifting due dates are banned, meaning a consumer’s credit card payment is due the same day every month. The purpose of this is to eliminate late fees charged to consumers who did not know their payment was due because the date changed from the prior month.

While all of these changes are intended to benefit card-carrying consumers, the law has brought about a need for consumer awareness of the terms and conditions of their accountsand a need to watch out for new traps. For example, many card providers were implementing new fees or raising existing ones (such as on balance transfers) before the law went into effect.

Also, the CARD Act restricts only certain fees currently being charged, leaving the door open for banks and other issuers to create new fees for consumers. And with the new restrictions in place, new fees are one of the few new revenue opportunities for issuers. This makes it vital for consumers to pay close attention to their account statements, so they always know what they are being charged for.

Another effect of the CARD Act is that it can be more difficult to obtain a credit card. Because of the many restrictions imposed upon credit card companies, they are demanding that consumers meet more qualifications in order to get credit. Young adults and college students are disproportionately affected. As of February 22, 2010, anyone under 21 is required either to show proof of an independent means to repay credit card debt or to have an adult cosign the account.

Overall, the rules of the CARD Act are designed to protect consumers, without letting them off the hook or giving them a pass to be irresponsible. Payments should still be made on time to avoid late fees, balances should still be kept low to stay out of trouble, and all agreements made should be followed. Credit card companies and providers are still in the business to make money, but now consumers should have more control over how much they have to pay for it.

Gary Dudak is a staff writer for

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