Consumers who take advantage of the sweeping reforms going into effect on February 22, 2010, can save and protect their credit. The “Credit Card Accountability Responsibility and Disclosure Act of 2009,” known as the Credit CARD Act, is the most important consumer legislation since Congress passed the Truth in Lending Act (TILA) in 1968. Marketplace Clearnet
But, at 33 pages, the Act is long and complicated. How can the average credit card users make the most of the forthcoming reforms in the CARD Act?
1) Opt-out of over-limit charges.
Beginning on the 22nd, credit card users must be given a fixed credit limit that cannot be exceeded (previously, consumers were surprised by over-limit fees after exceeding their limit.) If you attempt to charge something over your limit, it will be declined and you won’t be hit with a fee. Late fees are akin to parking tickets–you’re essentially paying for nothing. Yet, the new law is allowing users to “opt-in” if want the extra credit and give the creditor express permission to do so…along with accepting the over-limit fee.
2) If you receive a late fee, catch up within 60 days to avoid penalty interest rates.
Before the new laws take effect, paying just one day late could have disastrous effects on your interest rate. Now you can avoid high penalty interest rates by restoring your delinquent accounts to current status before they become 60 days past due. If the account is returned to good standing within those two months, creditors will not increase your interest rate because of the payments you missed.
3) If you are subjected to penalty interest rates, you still have a shot at redemption.
If you make each of your payments on time for the first 6 months after your penalty interest rate increase, creditors are now required restore your original interest rate.
4) Consider closing your account if you are informed of a pending steep interest rate increase.
Creditors now must inform consumers 45 days before any rate increases takes effect (barring certain circumstances, like if you pay late). If you can’t afford the new rate, and are up for shopping for new lower rates during that month, consider closing the account and opening a new one. However, if you have a card with a long history, it’s much better for your credit score to keep it open, use it occasionally, and simply switch a bulk of your charges to your new card with the lower rate.