Although the Credit CARD Act was approved in 2009, it’s only in recent times that its effects on users have become much clearer. Fair Isaac and Co. does not, for instance, make any changes with their risk-modeling program for evaluating credit scores without at least 2 years’ worth of data in their hands. Since the last of the phased changes of the CARD Act took place in 2010, it is only this year that the company would have sufficient information about the impact of the new laws on credit scores. It’s possible that credit card users would have to brace for even more changes – but whether it’s good or bad remains to be seen.
However, credit card users get to experience the following changes in the meantime due to the Credit CARD Act.
Limited increase in interest
Interest increases on new transactions will only take place after the first 12 months of usage. Moreover, any substantial changes with the terms and conditions of the card should be done with 45 days of advance notice.
Conditions for universal default
Universal default allows a company to raise interest charges based on an individual’s payment history with other issuers of credit, e.g. utility company. However, it can now only take place with 45 days of advance notice for future but not present balance.
An individual now has 5 years to pay off remaining balance based on present terms if or she decides to opt out of credit card usage because of changes in terms and conditions.
Credit Card for Young Adults
More limitations have now been set for offering credit cards to young adults. Companies may only extend credit card offers to those below 21 years old if they adhere to the following rules.
• They can show proof of sufficient income or—
• They can get an adult to co-sign for their account
• They must not make an offer within 1,000 feet from a college campus if their promotions include use of free gifts
Longer payment period
Credit card users should now have a minimum of 21 days from date of notice to settle their monthly balances. This particular change is in response to various complaints of credit card users in the past regarding sudden changes of payment dates, which then increased the chances of being penalized for late payment.
Increased transparency for date and time
The Credit CARD Act has also made it possible for credit card users to enjoy uniform regulations about payment due dates and deadlines.
• Due dates should remain the same every month
• Due date cut-offs should not be earlier than 5 p.m.
• Payments for due dates or on holidays and weekend as well as when a company is closed for business should not be penalized with late fees
Application of Payment
For credit card users with varying interest rates for varying transactions, payment must first be applied to balances with the highest interest rates.
Over-limit expenses are now an option and not made an immediate part of a credit card package.
• If you opt-out of this service, then your transactions will be immediately rejected when you have reached the limit of your credit card
• If you opt-in, the fee for over limits should not be more than the actual amount of your expenditure outside your limit. If you are allowed to spend $100 over your limit then your fee cannot be more than $100.
Numerous other changes have been made with the Credit CARD Act and you are highly recommended to learn about all them if it’s been a long time – or it’s your first time in all – to apply for a credit card.