The “Other” Provisions of the Credit CARD Act

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Thanks to the Credit CARD Act, visitors to national parks can carry licensed firearms beginning on February 22.

It is hard to believe that this unique provision was added to the revolutionary credit card bill passed by members of Congress last May.

Most of the attention from the bill has been given to the restrictions on interest rate increases and over the limit fees. However, there are many other lesser-known regulations in the Act that could have far-reaching ramifications for consumers.

Here is a look at some of those other provisions that take effect on February 22:

  • Young adults who are under 21 will have a harder time building up their credit history. If they do not have a job with enough income, they must get an adult to co-sign. Fewer students will have credit cards and this will represent a major shift in spending patterns among young adults. According to a recent Sallie Mae study, 84% of college students have a credit card and 92 percent of undergraduate credit cardholders charge textbooks, school supplies, or other direct education expenses.
  • The CARD ACT takes a stand against targeting students for credit card offers. Issuers cannot market credit cards within 1,000 feet of a college campus or at college sponsored events. Issuers must also disclose their agreements with colleges and universities.
  • The CARD Act forces a fairer distribution of payments. The minimum payment is still applied to the balance with the lowest interest rate. If a cardholder pays more than the minimum payment, the remainder will be applied to the balance with the highest rate. This could be very beneficial to those consumers who always carry a balance but only if you pay more than the minimum payment each month. However, some issuers have doubled the monthly minimum from 2.5% to 5% during the past year for some cardholders. So it may be more difficult for these consumers to realize the benefit from this provision,” says Bill Hardekopf, CEO of and author of The Credit Card Guidebook.
  • Due dates for monthly payments will be more standardized and predictable. The due date must fall on the same day each month. If that date falls on a weekend or holiday, payments are credited on the next business day without a late penalty. Consumers cannot be charged a fee for paying their bill unless they choose an expedited payment.
  • Your statement must clearly explain how long it will take to pay your balance if you only make minimum payments. It must also state how much you need to pay each month in order to eliminate your balance in three years.
  • The CARD Act adds some restrictions to rate increases, but your APR can increase if you have a variable rate card and the card’s index increases. Issuers do not have to give you a 45-day notice if this is the reason for the rate increase.
  • The CARD Act softens the penalty for late payments. If you are more than 60 days late for a payment, your APR can be increased. But if you have six consecutive months of on-time payments, your APR has to be restored to its previous level. Some issuers are changing the name on this from “default pricing” to “penalty pricing.”
  • The CARD Act does prohibit over the limit charges unless a consumer “opts in” to allow these transactions to go through and pay the penalty. Cardholders can opt-in orally, in writing or electronically. This can be revoked at any time. Those that opt in can only be charged one over the limit fee per billing cycle if they exceed their limit, not multiple fees.
  • Proof of income is required for new credit. Consumers must prove their ability to make required payments before they can open a new credit card account or increase the credit limit for an existing credit card account. Issuers must consider the ratio of debt obligations to income, the ratio of debt obligations to assets, or the income the consumer will have after paying debt obligations
  • Fees on secured cards cannot be greater than 25% of the initial credit limit.
  • Those companies advertising a “free” credit report have to explain how consumers can obtain a free credit report once a year from each of the credit bureaus
  • Issuers must provide toll-free numbers for consumers to get information about nonprofit credit counseling and debt management assistance.

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