credit cards

Watch for CARD Act mail

Monday, Jan. 4
Posted: 3 p.m.

Bankrate reporter Leslie McFadden contributed this entry.

Happy New Year, everyone!

As the holiday credit card bills come in this month, look for correspondence outlining how the Credit Card Act of 2009 will affect your account and card agreement. On Feb. 22, the bulk of the provisions in the CARD Act, which was signed into law last May, take effect. A last round takes hold on Aug. 22.

Some of the changes coming next month include:

  • No more arbitrary rate hikes on existing balances. The rate on a balance can't increase unless the cardholder misses a payment by 60 days or more, the promotional rate expired or the variable rate is increasing with an index. Issuers can raise rates for future balances for any reason with 45 days' advance notice.
  • Customer permission is required before assessing overlimit fees on charges that push the balance above the account limit.
  • Balances with higher APRs are paid first. Any payment amount over the minimum will first pay down balances with higher APRs.
  • Payment fees will end. Except for fees charged to expedite your payment, all fees to make payments will cease.

Why bother to read the notice?

Two reasons. The issuer might go above and beyond the requirements in such a way that could affect how you use the card. For instance, the law requires that issuers get permission before they can charge overlimit fees in applicable situations. Bank of America highlighted in its letter to me that it is doing away with overlimit fees. That means any charges that put my balance over the limit could get denied. That might be worthwhile to know if I'm constantly near my limit.

The letter might also alert you to rate increases, and other negative adjustments to your agreement. In cases where the card provider must give 45 days' advance notice of a rate hike, the company must also allow you the right to reject the rate increase and close your account. Canceling the account preserves your interest rate and doesn't trigger immediate repayment of the balance.

The CARD Act doesn't place a limit on interest rates and fees. Legislation introduced in December by Rep. Louise Slaughter, D-N.Y., and Rep. John Tierney D-Mass., aims to cap interest rates at 16 percent and fees at $15. I wouldn't hold out much hope for that bill getting passed.

Instead, pay down balances and keep an eye out for rate change notices.

If you need a new card, shop around. Most credit card mailings still offer cards with rewards and no annual fee, according to recent research from Mintel Comperemedia, a Chicago-based market research firm.

Questions? Comments? E-mail plastic_rap@bankrate.com.

Read all of the Plastic Rap blog entries.

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