Credit Cards (Andres Rueda/Flickr)
President Obama signed the CARD Act back in May 2009, but the new regulations on credit card issuers took until today to come into effect. The law was designed to protect consumers from many of the hidden fees, rate changes and small print traps that cost Americans $15 billion each year, but some aspects of the bill changed along the way. Now that it's here, how will it affect your monthly statements?
We talk with two contributors about what the CARD act will do (make rate changes slower and fine print larger) and won't do (pay your bill for you): Personal finance writer Beth Kobliner, author of "Get a Financial Life: Personal Finance In Your Twenties and Thirties
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Oh what a tangled web we weave... I have been a Bank of America card holder for a number of years. As is completely atypical for me, I missed one payment last August. They reduced my limit then gave me the option to keep my credit line open with a 30% (!!!) interest rate or cancel my account and keep my old interest rate (12%). The Rep that I spoke with told me, however, that canceling my card would negatively impact my credit rating! Then further insulted my intelligence by telling me that by reducing my limit and increasing my interest rate was supposed to help me pay off my $2,000 balance faster!! When I asked how that made sense, she told me that she's been training as a credit rep for many years and wouldn't have the time to teach me the how this was supposed to be true. I'm infuriated. (Further, whereas in the past I would pay off my balances with my annual bonus, my boss no longer gives bonuses b/c he doesn't feel he has to in order to keep good employees in a poor job market.) Tangled web, indeed.
The most important change I can think of is that the credit card companies can no longer jack up interest rates on existing balances. There are other important changes...paying down highest interest balances first, an end to double-cycle billing. All of this is no substitute for being disciplined and eliminating revolving debt.
I have three cards. I use my miles card almost exclusively and pay it off every month. I recently requested and got a 20% bump in my limit. My Citi card, which is an emergency backup card, got its limit trimmed a bit.