Byline Article What you should know about new credit card reforms by ps94506


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What you should know about new credit card reforms

Credit cards can be convenient, safe and useful financial tools. Used wisely, they can be
invaluable, for instance, in helping a young college graduate entering the workforce establish
good credit, helping a young family pay for an emergency medical bill or even helping the busy
professional with some last minute online holiday shopping.

On May 22, 2009, President Obama signed the Credit Card Accountability, Responsibility and
Disclosure Act of 2009 into law (the CARD Act), and the Federal Reserve has since released
new rules empowering consumers in regard to the new Act. You’ve probably already seen some
noticeable changes in the way your credit cards are handled, for example, having a full 21 days
to pay your monthly bill (instead of the previous 14-day period) and also a 45-day advance
notice of a significant change in card terms.

You should be aware of a number of other provisions that are in effect or will be going into effect

The next phase consumers will notice will take effect by Feb. 22. By that date, you’ll see limiting
of when interest rates can be increased, the banning of universal default (changing the terms of
a loan when the lender is informed that their customer has defaulted with another lender) and
double-cycle billing (a method of calculating interest on a billing cycle), and restricting of credit
cards for people under the age of 21 unless they have an adult co-signer or show proof they
have the means to repay the debt. The new law also bans the free giveaways that are so
popular on college campuses to entice students into opening new credit cards.

The new law vastly improves disclosures, which will greatly change the look of your credit card
statement. For example, the statements soon will be required to show the monthly payment
amount needed to pay off the existing balance in 36 months, including the total cost with

The final stage, which goes into effect Aug. 22, 2010, limits when credit card interest rates can
be increased on existing balances and allows consumers whose interest rates have been
increased to reduce their annual percentage rates to previous levels if they’ve paid their bills on
time for six months.
On the flip side, the new law does not cap how high interest rates can go, nor does it limit when
APRs can be hiked on future purchases. In addition, people with business or corporate credit
cards will not have the same protections as people with personal credit cards because the new
law and the federal rules apply only to consumer credit cards.

These are important steps in an ongoing process that will increase protections and make card
terms more predictable and manageable for customers. Not only does the new law end
confusing billing practices, but it also institutes new rules that make applications, notifications
and statements easier for consumers to understand. Customers will get even greater
protections from interest rate increases and will benefit from restrictions on fees.

These are just a few of the new protections under the new CARD Act. There are a number of
other new provisions in the law, and you can access the entire law at

It is very important for consumers to manage their credit cards, and the Credit Card
Accountability, Responsibility and Disclosure Act of 2009 will help you do just that. A good first
step is to read the “fine print” and understand the terms of the credit card agreement prior to
accepting it.

About the author: Linda Koch is President and CEO of the Illinois Bankers Association.

Linda Koch
President and CEO
Illinois Bankers Association
524 South Second Street, Ste. 600
Springfield, IL 62701

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