President Obama signed and passed the Credit Card Act in 2009 to help protect against rate increases of credit cards. This Act went into effect in February of 2010. The purpose of the new rules were to protect the consumer from the rate hikes that card companies were making in response to the poor economy.
It is easy to compare multiple credit cards just by using the FREE tool on this page!
Credit card companies are out there to make money, just like any other business. In the late 2000s, as more loans and mortgages defaulted, banks had to find a way to increase revenue. Many of them chose to do this by increasing penalty fees and interest rates on credit cards. As a result, the government stepped in and began to make some changes.
Disclosure of Changes in Credit Card Terms
Before February 2010, credit card companies could increase your interest rate for no reason and with no warning. This meant that you were stuck with the new terms and there was very little you could do about it. The Credit Card Act changed this practice.
According to the Federal Reserve, card companies are now required to give you due notice before making changes to your card terms. In fact, they must give you at least a 45-day notice for certain changes.
If your card issuer plans to increase your interest rate, whether it is for cash advances, purchases, or balance transfers, they must let you know ahead of time. They must also give you notice if late fees, fees for cash advances, or annual fees are going to change, as well as any other big changes to your card terms.
Restrictions to Rate Increases
Although the new rules require your card company to give you 45 days notice before your rates are increased, there are other rules in regards to the increases themselves. For example, if your interest rates are increased, the new rates cannot be applied to your current balance. They are only applicable to new charges.
The Credit Card Act also states that in the first year of an open account there can be no increase in your interest rate. There are some exceptions to this rule, however.
Exceptions to the Rules for Increased Rates
Although Obama set rules in place to help protect you from increasing rates, there are some exceptions to the rules. The rules mainly apply to interest rates that are fixed. If your card has a variable rate your APR can increase or decrease with the index and your card, company does not have to inform you of the change.
The rules also do not apply to a credit card with a promotional interest rate. If you have a card that has a 0% interest rate for six months, as an example, when the rate increases to the disclosed rate after 6 months you do not have to be informed of the change.
If you tend to pay your bill late, your rate can increase without the card issuer notifying you. There is a change in this practice, however. Credit card companies used to be able to increase your rate if your bill was even a day late, but the new rules require that they can’t increase your rate until you are 60 days late.
The final exception is if you have defaulted on a previous agreement with your credit company. If you had worked out a special payment plan, for example, and missed a payment or two, the company can increase your rate without notice.
Underage Consumer Protection
In the past, credit card companies would flood college students’ mailboxes with pre-approved offers for credit cards. This led to increased debt for many students because it was easy to be approved for cards that they didn’t use responsibly.
The Credit Card Act includes rules to help protect individuals under the age of 21.
Under Obama’s new rules for credit cards, companies cannot send pre-approved offers to most college campuses. This doesn’t necessarily mean that you can’t be approved for a credit card if you are under 21, but there are restrictions that make it more difficult.
If you apply for a credit card and are not 21 years of age, you must have one of two things. You either need to be able to prove you make sufficient income to pay your bills or you will need to have a co-signer for the credit card, who will ultimately be responsible for your debt if you can’t pay.
The chances of getting into credit card debt are less if you understand your personal finances and know how to use a card responsibly. MyMoney can help you with this.
Look at credit card offers right here FREE!
- Is it possible to stop credit card rates from increasing?
- What are the new laws on credit card rate increases?
- What can you do about rising credit card rates?
- Are there new rules for going over your limit on credit cards?
- Is Chase raising credit card rates for everyone?
- How often will banks raise credit card limits?
- Are there any credit cards offering fixed rates of interest on transfers?