What The CARD Act of 2009 Means to You

The U.S. Senate overwhelmingly passed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 yesterday. The House, already passed its own version of the bill last month, also voted 361 to 64 today to wrap up the legislation. Now the bill is sent to the President for his signature to become a law, which could happen before the Memorial Day weekend.

The CARD Act aims to protect consumers by preventing card issuers from hiking interest rates whenever they feel like to, charging fees that don’t make any sense, and allowing cardholders enough time to pay their bills every month. This video from New York Times explains quite well what the new credit bill means to consumers.

If you ask me whether I think this bill is a good idea or not, then my answer is yes, it is. However, I don’t see I can benefit much from this legislation personally because I have been following the simple rule in using credit cards since the first day I got my first card: Pay my bill in full on time every month. With this rule, I have never got into trouble with credit cards and enjoy a very good credit score. Credit card interest rate, which is the center piece of the new legislation, is never an issue to me, whether it’s 5% or 50%, because I haven’t paid a penny in credit card interests.

When using credit cards, what really bothers is credit card rewards program being downgraded, which unfortunately could be one of the consequences of the new CARD Act. Since now credit card issuers can no longer charge those fees (over the limit fee, pay bill over the phone fee, etc) they used to charge, they will have to find other legal ways to make up the shortfall in revenue, including adding annual fees to cards and canceling card rewards programs. If this indeed turns out to be the case, then I am afraid I don’t get any protection from the new rules. Instead, I become a victim of it :(

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4 Responses to “What The CARD Act of 2009 Means to You”

  1. tom |  May 21, 2009 at 7:44 am

    I’m firmly against it for the reasons you mention. We are already seeing rewards programs being downgraded… Chase and AmEx Blue Cash cards are reducing benefits. This is a populist bill because a majority of Americans carry a balance. I think we are rewarding irresponsible behavior. A vast majority of those that carry a balance simply bought more stuff than they could afford. Plus, all of the “shady” practices of credit card companies are explained in the terms and conditions and fine print. One can argue that “no one reads those”, but don’t complain when you miss a payment and your rate skyrockets.

    So I have to ask, if you are now a victim… are you still in favor?

  2. Sun |  May 22, 2009 at 12:46 pm

    @Tom I firmly believe it’s the cardholders who got themselves into the credit card trouble, not the credit card companies. If a person can only pay the minimum every month, but keeps charging the card, the person is responsible for his/her debt problem and nobody should bail he/her out. If everybody pays their bills in full every month, then we won’t have this mess.

    Now the annual fee and rewards program downgrade are just rumors. But if it does happen to me, then I will be very upset. It’s just like the government bailout of homeowners who can’t pay their mortgage. All the money goes to those people. People who keep their mortgage payments current are left with nothing. The credit card law could end up hurting people who pay their bills in full every month.

  3. Tom |  May 26, 2009 at 1:19 pm

    I agree that the rewards programs and new annual fees are the most likely source to make up revenue for the credit card companies. This could be a good thing in some respects, becuase if there is no rewards program and there is an annual fee, I won’t use the card anymore. Hopefully we remove some of our dependency on the cards as a result.

    I can live without the measely 1% cashback I am getting, even though it was nice to get every once and awhile.

  4. jwoolman |  Jun 03, 2009 at 3:53 am

    About 40% of card holders do pay in full every month. But most cc debt in the US is not due to overspending on “stuff”. Half is due to medical expenses. Even if insured, your insurer can refuse to pay if it decides (even if it pre-certified treatment) a billed item is medically unnecessary or priced too high for your area. Emergency patients especially get stuck with high bills for even minor problems (like my $15,000 UTI…) because of the predatory model for funding normal costs in US hospitals. Plus deductibles have to be paid, which many of us need to set high to afford premiums. Prolonged unemployment (often going along with illness) accounts for at least 25% of cc debt. Most of the rest is due to other emergencies (e.g. , repairs that must be made now). Probably only ten percent is for buying too much “stuff”, although some of that may be related to unexpected unemployment or illness when people decide to buy in installments in better times. Also many small businesses use personal credit cards to smooth out cash flow or buy needed equipment, supplies, and services while waiting to be paid or to get more work (the alternative is to go out of business…). Sneer at debtors if you want, but you all are just one prolonged illness or layoff or deadbeat client away from debt yourself.