The CARD Act was implemented to ensure consumers did not fall prey to the money making tactics of the credit card lenders. This came into effect in two phases, the first phase in 2009 and the second phase in the latter half of this year. Despite this Act, cardholders continue to amass debts, thanks to their unrestrained spending habits.
Talking on this topic, Janie Alegria, services coordinator with Consumer Credit Counseling Service of South Texas, a non-profit organization, said that the CARD Act cannot be considered to be a flawless one. Though this act does have a lot of benefits, there are also a few drawbacks. She said that it is important for every person to be knowledgeable about the various terms and conditions of the Act and take them seriously.
One of the main benefits of the CARD Act is that banks and other credit card lenders cannot increase the interest rates on the credit cards, for least one year after the credit card has been issued to the consumer. Now, there are set limits on the late payment fee and other penalties collected by the banks as well. According to the Act, the billing statement has to reach the cardholder at least 21 days before the due date so they can make arrangements to make the payment on time. Also, any increase in the rate of interest on the credit card should be informed to the cardholders at least 45 months in advance so they can consider if they want to accept the hike or close the credit card. As per the Act, any person below the age of 21 applying for the credit card should either have a co-signer on the application form or show substantial proof of employment certifying they can clear the dues on their credit cards.
One of the most beneficial reforms of the Act, according to Alegria, is the information on the billing statement that reveals to the cardholders how long it will take to clear off their dues if they continue making only minimum payments each month. This, she said, will serve as a reality check for clients.
Speaking about the downside of the CARD Act, she says that though a number of aspects have been brought under check with this Act, there are still a few loopholes that have been left unattended. She said that credit card companies can still find innovative ways to make money by levying new fees. The main drawback is the fact that there is no upper cap on the interest rate that can be charged by the banks.