Credit Card Legislation Can
Help Card Holders Save Money

New Legislation

New credit card legislation has finally been enacted by President Barack Obama, after much deliberation on how to protect consumers from credit card companies.

Credit card use and debt has grown by 25% over the last decade in the United States giving cause for concern. As a result, government has enacted new legislation on May 22, 2009 to impose certain guidelines on credit card companies. For you it could mean one of the best debt reduction plans if you are paying less in interest and fees to the credit card companies as a result of increased competition.

The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD) is the name of the new legislation. With its passage comes a promise to bring transparency and accountability to credit card companies. It may give consumers a better chance to reduce credit card debt.

At first glance the new credit card legislation, which will go into effect on February 22, 2010, looks like a victory for consumers. After all, the legislation aims at curtailing fees and interest rate hikes borne by credit card users.

Those That Pay Every Month

However, for those people that pay off their balance every month and enjoy the cash back and bonus awards are a bit concerned. Credit card companies have been threatening to cut those "bonus" programs to make up for lost revenue as a result of the new credit card legislation.

Many speculate that these threats are only idle and such changes will not occur. The reason being is that the credit card companies make a lot of money off the credit card purchases all of their cardholders make. This is despite the fact that some cardholders run up their tab and pay it off each month.

Those That Don't Pay Every Month

For the most part the bill is aimed at protecting the consumers that do carry balances and those that are likely to get into debt. "We're not going to give people a free pass, and we expect consumers to live within their means and pay what they owe, but we also expect financial institutions to act with the same sense of responsibility that the American people aspire to in their own lives," Obama said at a signing ceremony.

The measure received support from both Democrats and Republicans despite the banking industry's opposition. Credit-card companies argued that this type of a bill would force them to raise rates and clamp down on the availability of credit. Changes will take affect at various points in time during the year according to the credit card legislation.

Some of The Changes

• No longer will credit card companies be able to prey on college age students 18 to 21 years old. There are new strict rules on targeting people age 21 and under and no longer will marketing to that age group be allowed.

• Students will be required to have a co-signer. If the student has a paying income an exception may be granted to this rule.

• Restrictions on when credit card companies can increase interest rates on existing balances.

• A requirement that the credit card companies give a 45-day notice before they increase interest rates or make any major changes. The practice before was that the credit card companies could raise your rates at any time for any reason.

• The credit card companies have to wait until you are 60 days late before that they can impose a late fee.

• Bills must be sent out at least 21 days prior to being due.

• The date that a bill is due includes the entire day and not just part of it. For instance they cannot say that your bill in due by 10 a.m. in the morning and charge you interest and late fees if they don't get it until 3 p.m. that day.

• Ends the practice of shifting payment dates.

• Credit card agreements have to be posted online.

• Bankcards will need your permission before charging you an over your limit fee.

One of the items that was not accomplished in the credit card legislation was to have a ceiling on the interest rate that are changed. So beware of the rate that bank card companies are using to calculate your payments. This does not make for the best credit card rates we had hoped for.

These new rules will be phased-in periodically and will work to the benefit of consumers. Credit card companies will now be required to post there offering on the Internet. It should be easier to make an accurate comparison between cards that are available and choose one that offers the best bank rates. This in itself will make for some healthy competition.

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