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Credit CARD Act Effective February 22nd!

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The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, which was signed into law last May will take effect on Monday, February 22nd. So what does the new credit card act say and how does it benefit credit card consumers?

Payment Allocation. Previously, credit agencies could assign your monthly payment to lower interest charges and leave higher interest purchases to gain interest. The new law changes that, so that the highest interest charges are paid on first. Thus balances can be paid off faster.

Changes to Agreement. Before the CARD Act, changes to your credit card agreement could occur even retroactively. The new law requires advance notice of 45 days for all changes except: rate changes due to the index for variable rate cards, expiring introductory rates, and not paying a workout payment as agreed.

Over the Limit Fees. The law prior to the Act of 2009 allowed an extra fee on each transaction over your limit, and you were not notified if you were over. The new law does not allow a transaction to occur if you are over your balance unless you opt in for this action. WARNING! Be on the lookout for this option in a disguised fashion in your mailbox.

Age Restrictions. As most know. getting a credit card was super easy for the 18-21 age group, and this was causing major problems, especially for college students. With the new law, if someone under 21 can prove that they have a job and can make payments on a credit card, the requirement for a co-signer will be waived. Otherwise, a co-signor will be required. WARNING! If you co-sign for anyone, you become liable for any unpaid amount.

There are additional — yet less traumatic — stipulations within the new law as well. For example, statements have to be mailed at least 21 days in advance of due date and no additional fees may not be assessed for payment via mail/phone/transfer etc. Free offerings to college students cannot occur within 1000 feet of a credit card issuer. Similarly, part of the statement must include how long it will take to pay off a credit card if only minimum payment is paid.

Responsible credit use remains paramount. But these first-ever credit card reforms go a long way to assisting smart and proper credit card use.

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Comments (scroll down to add your own):

  1. Citibank has been scamming customers for years, by offering low-interest loans in addition to “normal” credit card purchases and cash-advance loans at a higher rate than the rate for “normal” purchases. So, an account holder could have as many as three separate balances, each with a different APR.

    Before accepting the offer of a low-interest loan (my “normal purchases” balance was zero and never had taken a “cash advance”), I called their Customer Service to ask how my monthly payment would be applied while there was more than one balance. No one could, or would, tell me. One guy offered a long and complex “explanation”, after which I said, “You don’t know, do you?”. He admitted that he didn’t know, and said that they had never been told the answer to that question.

    Of course, you know that Citibank would apply the entire monthly payment to the balance that has the lowest interest rate, while other balances with higher rates compound, until the balance with the lowest interest rate has been paid off. So, I accepted their offer of the low-interest loan, but I never bought anything with the credit card nor did I ever obtain a “cash advance”. Citibank sent letters asking me to call and discuss what they needed to do so that I would use the card for purchases. I never replied to those letters.

    And after the first low-interest loan was paid-off, they offered me another one, which I am paying-off now.
    Okay, the “normal purchases” balance was less than $100 and it hasn’t compounded to all that much yet, nor will it before I have repaid the low-interest loan.

    Citibank doesn’t offer those low-interest long-term loans any more. They still offer low-interest “loss leaders”, but after about 12 – 16 months, the unpaid balance is added to the “normal purchases” balance. No deal!

    Comment by Stardance — Feb 20th 2010 @ 5:23 am

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