New Credit Card Legislation Goes into Effect in February 2010

Among many money related changes happening in 2010, the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 is one of those that will have a big impact on our everyday life financially. Though the law itself won’t be in effect in July this year, some provisions will knick in as early as next month.

Recently, I started to receive mails from credit card issuers, such as Bank of America (I have UPromise card with them) and FIA (Fidelity 529 card), regarding the early changes and how they will affect my responsibilities. The letters both have very similar contents, including highlights of the new legislation which I repeat here:

• Your rate for existing balances will no longer be raised for being a few days late with your payment. If your payment is received after your due date, you will still be charged a late payment fee.
• Beginning February 13, 2010, you Annul Percentage Rates (APRs) on existing balances can only be raised if you do not make your minimum monthly payment within 60 days of the payment due date. In that instance, we can amend your agreement in order to raise your Annual Percentage Rates for all existing balances and future transactions. If your Annual Percentage Rates are increased because of this reason, your existing balances can return to the original Annual Percentage Rates if, for the next 6 months following the increase, you make your required payments by the due date. We can also increase your Annual Percentage Rates for future transactions if you are not 60 days late. We will always provide you with at least 45 days prior notice of any rate increase by sending you an amendment to your Account Agreement.
• Any amounts you pay over the minimum payment will now be used to pay down balances with the highest Annual Percentage Rate.
• For your convenience, your payment date will always fall on the same date of each month and will be at least 25 days from the closing date printed on your statement.

Among these changes, the one I like the most is item #3 that payment will be used for balances with the highest interest rate. Until the new rule takes effect in February, payments are always made toward balances with the lowest interest rates, which is designed by the credit card companies to charge more fees and get cardholders deeper into debit. I also like that now payment due day is the same date of each month. This will make managing bills easier because I know exact when I have to pay the bill every month.

Personally, these changes won’t affect me very much because, as I mentioned before, I have never had any trouble with payments or interest rates with credit card issuers as I paid every credit card bill in full on time. Doing so allows me to basically ignore credit card fee and interest rate adjustments made by issuers. Nevertheless , these are welcome changes that are long overdue and will benefit many cardholders.

Photo credit: roujo