Earlier this year Barack Obama signed into law the Credit CARD Act (CARD standing for Credit Card Accountability, Responsibility & Disclosure). In general, it forbids or revamps many credit card industry practices that were designed to charge higher fees and interest. A handful of the laws are already in place, the rest going into effect by February of 2010. Go here to see a full list of the changes to come.
While the new law is consumer-friendly, don’t let down your guard. Yes, the new laws protect you from the most egregious credit card practices. But if you’re someone who plays loose with credit, they won’t protect you from yourself.
Let’s look at the changes that just went into effect, to understand some of the new protections — and how a lazy consumer can still screw up:
- Credit card issuers must give 45 days notice before raising interest rates, up from 15 days previously. The new laws ensure that you will have more time to make new arrangements should your credit card company hike your rate from 9% to 19%.
- Don’t screw it up: Use the longer period to pay your debt and/or get a lower interest card, not as a longer window to procrastinate. Also, open your mail – getting 45 days notice is no better than 15 if you’re not paying attention when the news comes through.
- Credit card issuers must send bills 21 days before they are due, up from 14 days previously.
- Don’t screw it up: Some people will pay at the last minute (and get charged late fees) no matter how much time they are given. Use that extra week to make sure your payment gets there in plenty of time, not as an extra week to procrastinate
- If your interest rate is hiked, you now have the right to reject the changes and pay off your balance at the old rate (although you won’t be able to use the card anymore).
- Don’t screw it up: If you reject an interest rate hike, you still have to pay off the card! Don’t just open new lines of credit in order to make new purchases and put payment of the old, closed account on the back burner. Because if you get an interest rate hike on your new card, you could get stuck with multiple closed accounts and no option for further credit.
While the new laws bring needed changes, they won’t change human nature. I believe that many of the same people who got themselves into credit card trouble before will continue to do so. They’ll live on the very edge of the rules (whatever those rules may be) and afterward point the finger everywhere but where it belongs: at themselves.