New credit card rules explained

February 24, 2010 8:48:56 AM PST
The credit card industry is huge. This year, it is expected that 181 million Americans will be credit card holders and data from end of 2008 indicates that Americans credit card debt had reached $972 billion. The average amount of credit card debt for households that have a balance is around $11,000. I recommend that people have two, no more than three credit cards; however, the average American household has over ten. On Monday of this week, new laws were established to help protect consumers from unfair lending practices and being blind sided by fine print. The new laws are part of the CARD Act and include the following highlights:

Monthly statements are now required to list pertinent information in plain sight. There will also be a section that indicates how long it will take to pay off the current balance if you are only making the minimum payment.

Age pre-requisite
College students have long been easy targets for credit card companies as they are easily lured by free t-shirts and pizza to sign the dotted line. A recent Sallie Mae study revealed that college students have an average balance exceeding $3,000. The new law has put a stop to this predatory practice commonly seen on college campuses. Unless a student has their parents' permission or can prove they have the income to stay on top of monthly bills, credit cards will not be granted to those under 21.

There are two areas where consumers will have more time. Currently, we have 14 days from the time the bill arrives to when payment is due. The new law requires card issuers to give at least 21 days to make a payment.

Any changes to credit card terms, most importantly, interest rate increases, must be given advance notice of 45 days before any changes can be made.

What is not covered?
Interests rates. The new law does not put a limit on how high they can go. You will have more notice to changes in your terms, but you are not protected against skyrocketing rates. Another important fact to remember is that these new laws only apply to individual consumers. Neither corporate nor business credit cards are protected under these new regulations