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The Credit Card Accountability Responsibility and Disclosure Act, also known as the Card Act, was signed back in 2009. It went into effect 9 years ago on February 22, 2010. Most Americans have probably never even heard of the CARD Act and have no idea the huge impact that it’s had on consumers. Credit was not always the way it is now. We’re going to go more in depth on what the credit card world was like before the CARD Act and see how it’s evolved.
In the past, financial institutions were able to do the following:
Your interest rates would be raised without prior notification or a reason. Issuers were also able to raise your interest rate on existing balances, instead of just on new purchases. This retroactive interest rate increase could cause you to go into debt faster.
In the past, there were over-the-limit fees that were charged because the issuer would allow its cardholders to exceed their limits but then charged the cardholders fees for doing this .They also did not have any guidelines for late fees and it wasn’t until you saw your statement that you realized you were charged a fee.
It’s still not that easy to understand the fine print, but in the past it was even worse and websites were not clear either.
Issuers would set up a table at college campuses and offered students incentives for signing up for credit cards and unfortunately, these students had no clue what they were getting themselves into. I don’t think free pizza is enough of an incentive to sign up for years of debt and high-interest without really understanding how credit cards work and how to use them properly!
So now that we have a better idea as to how credit cards were like in the past, let’s see how the credit card world is like now, and how the CARD Act has benefited consumers.
Financial institutions now have to follow these rules:
If you transfer your balances onto a credit card that offers 0% interest for a promotional period, it can help you pay off the balance faster. Keep in mind that there are usually balance transfer fees associated with this and that you should make sure you can pay off the entire debt before the promotional period ends.
Issuers can’t change your APR during the first year unless certain conditions are met. An example could be if you have a 60-day delinquency on your account. If your rate is increasing, you must be notified by the issuer at least 45 days before the rate changes. Also, retroactive rate increases on existing balances are not allowed unless the cardholder meets certain conditions.
You must be asked by your issuer if you want to opt in to be able to exceed your credit limit. This will still cause you to be charged a fee, but at least you know ahead of time that this will happen if you opt in. This option is not really recommended as it can lead you to go into more debt. When it comes to late fees, there are limits as well.
The issuer has to send you your statement at least 21 days before the due date either by mail or electronically. There are also restrictions on payment issues, for example if the due date lands on a weekend or holiday. If the consumer pays the next business day, it can’t be considered a late payment. Keep in mind that the CARD Act does not require issuers to offer you a grace period.
Your statements include information on what would happen if you only made the minimum payment. You are able to see how long it would take to pay off your balance, in addition to showing how much interest you would pay. Issuers are required to have cardholder agreements available to review online. You may still have to do a little work to find the rates and fees, but the information is there.
One of the best things about the CARD Act is the protection it offers young adults.If you are under 21 years of age, you must show you have sufficient income to repay your debts in order to get a credit card. Issuers cannot offer free gifts for signing up.
By knowing the rules of the CARD ACT, you’ll be able to know when your rights are being violated. The CARD Act protects consumers and if you feel like your issuer is breaking the rules, contact the CFPB and file a complaint.