New credit card regulations to take effect in February Published Jan. 7, 2010 By Stewart Kaplan, community readiness consultant Airman and Family Readiness Flight BOLLING AFB, D.C. -- If you're a credit card user, you'll definitely want to know how the new Credit Card Accountability, Responsibility and Disclosure Act of 2009 will affect you. The CARD Act became law last May and has three parts. The first part went into effect in August, the second part will go into effect in February and the third part will go into effect in July. The CARD Act has some definite pluses for consumers, but there are some pitfalls consumers should also be aware of. The first change in August 2009 involved two time periods: 21 days and 45 days. Credit card companies must now allow at least 21 days after mailing statements before requiring a payment. They must also give consumers at least 45 days advance notice of any increase in the interest rate or any of the other account terms. Along with that, they are now required to allow a consumer to "opt out." That does not mean you can simply tell the credit card company, "No thanks," when they notify you of a planned interest rate increase and go on using the card under the older, better terms. It's not going to be quite that easy. If you choose to opt out, you have to reply back to the credit card company telling them you are choosing to opt out. They will then close your account. If they close your account, you will of course, still have to pay off any outstanding balance at the old interest rate and account terms. In other words, you won't have the ability to charge anything new. What happens if you don't respond? They will change any the terms of your account that they've notified you about. What does that mean for you? It means the days of ignoring those boring notices from your credit card company are over unless someone doesn't care what happens to their account terms. Here's what you can look forward to after Feb. 22: Credit card companies will only be able to increase rates on outstanding balances if they have previously notified you their rates are "stepped," the rate is tied to an index, the consumer fails to comply with a workout agreement or the consumer is someone who, despite the 21-day rule, still pays late. The new rule is actually lenient because it specifies that a cardholder's payment has to be at least 60 days late. Even then, the credit card company has to lower the rate back down if the consumer pays on time for just six months! Among a number of other provisions, is one that prevents you from being charged an "over-limit" fee unless you specifically tell the credit card company to let charges go through which take you over the limit. If you don't opt in, any charge you make on your card that takes your balance over the limit will be rejected. That might be mildly embarrassing, but at least you won't get hit with a hefty fee like in the past! Finally, in July the rest of the changes go into effect. The first of those is a rule that applies to higher interest rate imposed on consumers for violating the terms of their account agreements. The card issuer will be required to maintain fairer rules and to review every case where a "penalty" rate was imposed at least every six months. From July on, penalties have to be "reasonable and proportional." Lastly, the credit card company will be required to use a standardized format that puts all the account terms and conditions in clear understandable tables without confusing legalistic language. As always, contact us if you'd like any help managing your own financial matters. Community readiness consultants are located in Building 13 on Bolling and Rm. 5C1049 at the Pentagon. Call (202) 767-0450 at Bolling and (703) 693-9460 at the Pentagon for more information.