The Credit Card Accountability, Responsibility, and Disclosure Act takes effect starting today. This act will work to increase the amount of information clearly presented to consumers about their bills, interest, and changes to their account. This is good news for consumers, but you still need to understand these changes and pay attention to your credit card agreements and activity! Some of the changes include:
▪ Credit card companies must notify you at least 45 days before they can increase your interest rate or change certain fees applicable to your account.
▪ Your bill will have a table showing how long it will take you to pay off your balance if you make only the minimum monthly payments. Here is an example of a credit statement provided by the Federal Reserve:
New Balance $1,784.53
Minimum Payment Due $53.00
Payment Due Date 4/20/12
If you make no additional charges using this card and each month you pay the minimum payment,you will pay off the balance shown on this statement in about 10 years and you will end up paying an estimated total of $3,284.
If you make no additional charges using this card and each month you pay $62, you will pay off the balance shown on this statement in about 3 years and you will end up paying an estimated total of $2,232 (Savings= $1,052)
▪ Credit card companies cannot increase your interest rate for one year after you open the account. Be sure to read the fine print, as there are some exceptions to this rule.
▪ Credit card companies must mail you your bill at least 21 days before your payment is due. You must have the same due date each month and your payment must be deemed “on-time” if it is received before 5:00pm on that date.
▪ When paying your bill, if you make more than the minimum payment, the company must credit the extra amount to the balance with the highest interest rate.
▪ Credit card companies are prohibited from imposing “two-cycle billing,” meaning they can only charge interest on balances in the present billing cycle.
While these changes are encouraging and will help to protect you as a consumer, you should still carefully look at any information your credit card company sends to you and be aware of your plan’s details. For more information on the CARD Act and its provisions, read WISER’s newsletter.