New Credit Card Rules Kick In - WTVM.com-Columbus, GA News Weather & Sports

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New Credit Card Rules Kick In

By Zaneta Lowe  - bio | email | Twitter

COLUMBUS, GA (WTVM) - The Credit Card Accountability, Responsibility and Disclosure Act, or the law passed in May known as, Credit CARD was created to put a stop to what's considered abusive practices.

The sweeping credit card legislation launches in phases with the first wave of rules going into effect Thursday.

For starters, credit card companies will now be required to give 45 days notice before they can increase a rate.

"In addition to the 45 days, credit card issuers have to give consumers notice they can cancel their card, given these changes in their annual percentage rate," explains Dr. Norman Godwin, CPA and professor at Auburn University.

If consumers opt to cancel the card, they have to agree to pay off the balance within five years, but get to maintain the previous rate.

The new rules also give cardholders at least 21 days after their bills are mailed to make a payment.

"So you have three weeks from the time you get your statement to the time your minimum payment is due," adds Godwin.

It also eliminates due dates that fall on weekends, in the middle of the day or dates that change monthly.              

Despite these changes, most don't even kick in until February.  The new law prohibits over the limit fees for cardholders who haven't agreed to allow over the limit transactions.

Credit card issuers must also apply payments to higher interest balances first, instead of the lowest, like many typically do now.

It also requires account statements to show how long it will take to pay off a balance, including interest, if a consumer only pays the minimum due.

Godwin says these measures will certainly protect consumers from bad practices, but not bad habits.

"Really, it is not an excuse to use your credit card anymore that you normally do, it just gives you a little bit more time to process the information the credit card company gives you."

In addition, credit card companies have to stop two-cycle billing for calculating interest charges.

Issuers also have to provide clear disclosure of the account terms and post the entire contract  in plain language online.

The new legislation also bans issuing cards to those under 21 without parental consent or without verifying their ability to pay.

Despite these changes, some consumer advocates say the new rules don't go far enough.

For example, there's no cap on fees that companies can charge and there are no rules that prevent them from cutting a person's credit limit if the fees go too high.



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