The final phase of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act) went into effect yesterday. The Credit CARD Act is already doing a lot of great things for consumers. And, it is worth noting that the Credit CARD Act is different than the recent Regulation E legislation that affected overdraft fees earlier this month.
Here are some top features of the legislation:
- Late fees: Credit card companies can no longer charge you more than $25 for a late fee (or up to $35 if you have been late in recent history). Your late fee cannot be more than your minimum payment, i.e. if your minimum payment is $15 then your late fee cannot be $25, it can only be $15. However, do not ration a late payment by the fact you pay less now. You will see in the APR section why you won’t want to miss a payment.
- Over limit fees: Credit card companies can no longer charge you outrageous fees for going over your credit limit. Your over limit fee cannot be more than the amount you go over your limit by. For example, if you only go over your limit by $20 then they can only charge you $20. Also, you can impose a limit on your card that you don’t want to go over. Rather than going over the limit, the card would decline the purchase, saving you the over limit fee. Finally, your credit card company can only charge you 3 billing cycle’s worth of over limit fees.
- Annual Percentage Rate (APR): Companies must now review your credit every six months to determine if your recent payment habits should warrant a new APR. This is a double-edged sword, as good habits can be rewarded with a lower APR and poor habits can be penalized with a higher APR. This is my least favorite item on the bill as it seems to benefit the credit card companies more than the consumer. If you are subjected to a rate increase and then pay on time for the next six months, you can have your rate lowered back to what it was BEFORE the rate increase. But if you don’t, then you have to wait another six months for your next review.
To read more about the Credit CARD Act, visit Wikipedia.com.
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