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New credit card rules take effect today

You’ve probably heard about the new credit card rules that are officially in place as of today under the CARD Act of 2009.  These new laws are meant to offer protections to consumers like you who use credit cards.

Here are some of the highlights on the new law:

• Creditors can no longer randomly raise your interest rate.  The law says the new act puts a stop to “unfair” rate increases, though I haven’t found a definition of what’s fair or unfair.
• Creditors must give 45 days notice before raising your interest rate.
• If your interest rate is increased, you can opt out of the increase.  If you choose to “opt out,” your account will be closed and you will pay off your existing balance under your current interest rate.
• If you do accept the rate increase, your creditor cannot make the increase retroactive to your old balance.  The new rate will only be applied to new charges going forward, not what you’ve already charged.
• The language on your credit card has to be plain and visible.
• Your creditor must show you on your monthly statement how long it will take you to pay off your balance if you pay only the minimum payment each month.

I think that last point is really going to grab the attention of a lot of people.  Some people think as long as they are paying the minimum payment that they’re doing fine.  In reality, paying the minimum is not a good idea, especially if you have a high balance and a high interest rate.  In some cases, paying the minimum on your credit cards means you’re barely covering the interest payment and doing little to nothing to chip away at your principle balance.

It’s important to stress that, while these new rules offer protections for the consumer, it’s still up to the consumer to take responsibility.  Consumers have to open and read their mail and their credit card contracts.  Consumers also have to be cautious about using credit cards and only charging what they can afford to pay off each month.

There are many more consumer protections in the new law.  You can learn more about the new act at CreditCards.com.   The White House also put out a Fact Sheet about the new act.  And you can find tons of information by Googling “CARD Act.”

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