Credit freezes are a great idea to protect yourself against identity theft but they aren’t designed to last forever.
What is the CARD Act?
The Credit Card Accountability Responsibility and Disclosure (CARD) Act is a law that gives additional security and protection to credit card users. The law was enacted in response to the staggering level of unsecured debt that consumers were carrying. President Barack Obama signed the CARD Act into law in 2009.
The CARD Act made significant amendments to regulations pertaining to credit card billing statements, interest rate increases, payment due dates and penalties for exceeding a credit limit. Among the significant changes made by the CARD Act are:
- Introductory rates. Card issuers are required to provide better disclosure of introductory rates, also called “teaser rates.” These below-market, temporary rates must be good for at least six months.
- How payments are applied. Payments that exceed the minimum amount due must be applied to the balance with the highest interest rate first.
- Fee and rate hikes. Credit card issuers are obliged to send cardholders a written notice at least 45 days prior to increases in interest rates and fees.
- Payment schedule. Card issuers must give customers at least 21 calendar days from the day a bill is mailed to make a payment.
- No surprise fees. Card companies must get the permission of the cardholder to process a transaction that would put the account over the spending limit and incur a fee.
- Payoff calculations. Card issuers are required to provide customers with an estimate of how long it would take to pay off a balance with the minimum amount due each month.
Use Bankrate’s calculator to help you figure out a plan for paying off your credit cards.
CARD Act examples
Mary has two separate balances on her credit card. One is a balance transfer of $3,000 with a 1.99 percent interest rate for 18 months. The other balance is $4,200 in regular purchases at a rate of 14.99 percent. When Mary mails her payment, she always sends more than the minimum due. Under the CARD Act, her credit card company is required to apply any payment over the minimum to her $4,200 balance because that balance is being paid at a higher interest rate.
In addition, when Mary’s card issuer raised its fee for exceeding the credit limit, the company sent Mary a letter 45 days before the increase went into effect, as required by the CARD Act.
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