New Credit Card Rules Mandatory as of Today

The CARD (Credit Card Accountability, Responsibility and Disclosure) Act, which was passed by Congress last year, takes effect today. Compliance with the CARD Act is now mandatory.   Here are some changes that protect cardholders taking effect today:

• Payment due dates must be the same every month. So card issuers won’t be able to lull cardholders into making a late payment by changing a payment due date.

• Monthly statements will have to be sent 21 days before a payment due date. Card issuers must accept payments up until 5 p.m. on the due date.

• If an account has more than one balance, a payment made in excess of the minimum payment must be applied first to the balance having the highest rate of interest. This is exactly the opposite of what many card issuers do now in pursuit of greater profit.

• Card issuers can no longer use a two-billing-cycle look-back method to compute interest. Interest can be charged only on balances in the current billing cycle. This becomes important if a cardholder pays the account balance in full in one month but makes only a partial payment in the following month.

• Introductory teaser interest rates must remain in effect for at least six months.

• A cardholder must be delinquent for at least 60 days before the card issuer can raise an interest rate due to late payment.

• Credit card issuers can assess over-the-limit fees only if the cardholder tells the card issuer it is authorized to accept over-the-limit transactions. However, not giving such authorization will increase the likelihood that the card issuer will reject an over-the-limit transaction. (This can be very embarrassing — especially on a first date — if you’ve just eaten at a restaurant and have no means of payment other than your credit card.)

• Card issuers will have to give 45 days’ notice — up from 15 days’ notice — before making a “significant change” in the terms of an account. Significant change includes an increase in interest rate and an increase in fees that apply to an account. No notice of an interest rate increase will be necessary if the account is a variable rate account and the interest rate increase results from an increase in an index.

• Under the CARD Act, a cardholder has the right to avoid an increase in interest rate or fees by canceling the card. Cancelation will terminate the right to use the card for subsequent transactions. It will also allow the card issuer to increase the minimum monthly payment required to pay off existing balances.

• Monthly statements will now contain a chart showing how long it will take, and what it will cost in total, to pay off the existing balance making only required minimum payments.

It’s more important than ever to read carefully the notices you receive from your card issuer.   Not all card issuers are responding to the CARD Act in the same manner.