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How does the CARD Act Affects Me?

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By demanding clarity and transparency from credit card issuers, the Credit CARD Act of 2009 is providing the industry with much needed consumer-friendly legislation. The law puts new regulations on how banks deal with interest rate hikes, introductory offers, and delinquent payments. Depending if you see the glass half full or half empty, the CARD Act has been mostly beneficial for consumers. But there are some things about the Act that can still affect you.

1. Rising Interest Rates. Nationwide, interest rates are rising and eventually so will your rate. Many thought that under the CARD Act, interest rates would be locked at a certain fixed rate. While the act does prohibit banks from raising interest rates that is only applicable for the first year after the credit card is issued. There are other exceptions. For example, some variable-rate cards have a clause written in their contract that says that the bank can raise the interest rate whenever it is tied to a publicly reported or a prime rate. Also, if a payment is more than 60 days late, interest rates can also increase.

2. Increased Fees. When the CARD Act was passed, it was understood that banks were to use discretion when charging fees. For example, it was required that the banks give the consumer 45 days notice before they increase a consumer’s rate or fees. Well, I guess it wasn’t all too clear, because the 45 days notice applies to 45 days after the rate of increase or fee charge, not 45 days after the consumers’ payment due date.

3. No Access to Credit if Under 21. The CARD Act also promised that it would cut overzealous marketing tactics directed towards young consumers and college students. Credit card issuers would not be allowed to set up tables on college campuses and interact with students directly there. The intent of this clause was to protect young consumers from unwittingly getting trapped in a circle of debt. With the new legislation, students who are under 21 would have to have a guarantor for the card, such as a parent, or someone with established credit, or prove that they meet the income requirement. Credit card issuers have found a loophole around this by setting up tables a few feet from campus that parade free giveaways and coupons with substantial savings.

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