New Credit Card Law For Cardholders

The new federal government credit card law started Monday, February 22nd. The main reason this law was created is because credit card companies were finding too many ways to put Americans with credit cards deeper into debt.

Below is a list of changes affecting all credit cards holders.

INTEREST RATES

The rate cannot be raised in the first year after an account is opened unless an introductory rate has come to an end. After that, cardholders must be notified 45 days in advance of any rate change.

For existing balances, rates can't be raised unless the account is at least 60 days past due. If payments are made on time for six consecutive months, the original rate must be restored.

There is still no cap on interest rates that a credit card company can charge.

DISCLOSURES

Cardholders will see how many months it will take to pay off a balance if only minimum payments are made. Statements will also indicate how much needs to be paid each month to pay off a balance within three years.

SERVICE FEES

Service fees, such as activation and annual fees, will be capped at 25 percent of the credit limit during the first year of use. After that, there is no cap.

One popular card, Premier Bannkcard, for those with poor credit scores use to charge
$256 in first-year fees for a $250 credit line. These excessive fees will not be as high in the future because of the new law.

OVER-THE-LIMIT FEES

The cardholder must specifically agree to permit transactions that exceed the credit limit. Only then can over-the-limit fees be charged. But the fees can't be triggered by other fees or interest charges. Only one over-the-limit fee may be imposed during a billing cycle. No over-the-limit fees may be charged unless the cardholder has specifically agreed to permit transactions exceeding their authorized credit limit. These fees can no longer be triggered by other fees or interest charges imposed by the card issuer, and only one such fee may be imposed during a billing cycle.

UNIVERSAL DEFAULT

Card companies cannot raise interest rates on existing credit card balances. Interest rates can't rise during the first year an account is open, unless the original agreement spelled out a promotional rate for a limited time.

Consumers with older accounts must be informed of any interest rate increase on new charges at least 45 days in advance. They must also be given a chance to opt out of the hike by canceling the account and paying down the balance at the old interest rate. If an interest rate is increased, the card company must review the account once every six months to assess whether the rate should be dropped.

STUDENTS

Credit cards may no longer be issued to anyone under age 21, unless the applicant has a co-signer, or can show independent means to repay the debt. Colleges must disclose any marketing deals they make with credit card companies. Banks are not allowed to hand out gifts on or near campuses or at college-related events anymore.

This is a good one because in 2008, 84 percent of undergraduates had at least one credit card. Average balances topped $3,100.