What are the New Credit Card Laws?
Consider the pros and cons of the new rules and get 10 tips to find the best credit cards!
Laura Adams, MBA
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What are the New Credit Card Laws?
If you’re like most Americans, you have a credit card or two in your wallet, and wouldn’t leave home without it. Back in show 126, called Take Charge of Your Credit Cards, I mentioned upcoming legislation for consumer protection called the Credit Card Accountability, Responsibility, and Disclosure (or CARD) Act of 2009. The first phase of the new law was implemented on August 20th and the remaining two phases will go into effect in early and mid-2010. In this show I’ll cover the three major provisions of the first phase and give you 10 tips to help you win the battle of consumer versus credit cards!
New Credit CARD Act Rule #1
The first change all credit card users will notice is that you’ll get more advance warning about changes to your account. If a credit card company wants to make any substantial changes to your terms, such as increasing your interest rate or fees, they have to notify you in writing at least 45 days in advance. Prior to the new legislation, consumers only got a 15-day heads up about these types of impending changes, if they received any notification at all.
New Credit CARD Act Rule #2
The second provision in the CARD Act is that you can just say “no” to your card issuer’s proposed changes to your account. The company must inform you in writing about your right to opt out of their changes. If you don’t want to pay a higher interest rate or more fees, you can cancel your account before they make any changes. That means, of course, that you can’t use the card anymore to make new purchases, but if you have an outstanding balance, cancellation allows you to lock in the original, lower interest rate and other terms on your account while you repay it.
New Credit CARD Act Rule #3
The third change that went into effect in round one of the new credit card law is that you’ll have more time to pay your bill. Card issuers must now give you at least 21 days to pay up after your statement has been mailed out or electronically delivered. That’s an improvement from the previous 14-day billing requirement.
The Downside to the Credit CARD Act
While these changes to credit cards are a real win for consumers, the banking industry has said that they come with a downside. The problem is that banks are expecting reduced profits as a result of the legislation, on top of the losses they’ve already experienced due to the recession. That leaves them scrambling to find new ways to create revenue and to protect themselves against risk. Many card issuers have already cut credit limits and increased interest rates, fees, and minimum payments in anticipation of the new laws, before customers could legally opt out. By the way, the new rules don’t prohibit slashing your credit limit or increasing your minimum payment–and you can’t opt out of those changes like you can with interest rate hikes and fees.
In general, credit may become less available for individuals and small businesses under the new regulations. Or it may take a higher credit score to allow you to get the same amount of credit that you could have gotten before. Many domestic banks have already raised the minimum credit score that they require for credit card approval.
How to Get the Best Credit Card Deals
The bottom line is that you need to stay alert for changes to the terms of your credit cards, and consider ditching one and applying for another when there are better options. Here are 10 tips about where to find the best credit card deals and how to get the most out of your existing cards:
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Pay all your bills on time so you keep your credit score in tip-top shape. As I mentioned, those with better credit will get better credit cards, which means you’ll save money on interest and fees.
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Find out what credit cards your bank offers. Sometimes also having a deposit account with an institution qualifies you for a better deal or special card rewards.
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Consider opening a brokerage account with an institution that offers a competitive card. For example, Charles Schwab has been recognized for their Visa rewards card that gives brokerage customers 2% unlimited cash back with no annual fees.
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If you have a card that you like, but haven’t used in a while, consider making at least a couple small charges on it each year. That will prevent the issuer from canceling the card due to inactivity and ensure you keep a good credit card.
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Set up your credit card for an automatic minimum payment. Some institutions, such as Chase, offer special rewards for enrollment in auto-pay. That way you’ll be sure to never miss a payment deadline and get stuck with increasing late fees and penalties. If you can pay more than the minimum, you can always change the transaction amount before the due date.
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Be sure to pay your balances off in full and on time each month, especially when you use higher-interest rewards cards. You may find some banks are scaling back rewards, charging new annual fees, and revoking awards when you pay late. When that happens, they may charge you a fee to reinstate your awards.
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Consider card offers from smaller, regional banks or credit unions that may offer better deals. The Pentagon Federal Credit Union always gives nice perks to members and if you’re not eligible to join for free you can still get in by paying a small annual fee to the National Military Family Association. The Pentagon credit union has a rewards card that pays cash back each month of 5% for gas purchases, 2% at supermarkets, and 1.25% on everything else, with no annual fee. Check it out at penfed.org.
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The American Express Blue Cash card is one of my personal favorites to use where it’s accepted. It offers 5% cash back each year for gas, groceries, and drugstore purchases and 1.25% cash back on just about everything else after you spend a certain amount, with no annual fee.
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If you have excellent credit, take advantage of it by getting a low-interest card. Right now the Simmons First National Bank has a Visa with a 7.25% variable interest rate. Visit simmonsfirst.com for more details.
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Take a look at the following websites to research other credit card offers:
You’ll find links to all the resources I’ve mentioned at moneygirl.quickanddirtytips.com. I’ll keep you updated about the next phase of regulations that’ll take effect in February of 2010. That’s when we’ll see restrictions on interest rate increases, new gift card policies, limitations placed on marketing credit cards to young adults, and much more. For the episode that discusses those new rules for credit cards, click here.
Administrative
Get ready for a new podcast on the QDT Network–it’s called The Dealista! It’s all about getting more for your money by shopping wisely, spending less, getting freebies, and beating retailers at their own game. Find it soon on iTunes and at quickanddirtytips.com.
Keep up with me on Twitter under the user name lauraadams, with no space. Find all my other contact information at moneygirl.quickanddirtytips.com.
I’m glad you’re listening. Chi-Ching, that’s all for now, courtesy of Money Girl, your guide to a richer life.
More Resources:
The Credit CARD Act of 2009
Credit Card image courtesy of Shutterstock
About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.