Credit Card Reform - Credit Card Accountability Responsibility and Disclosure Act of 2009

As of today, February 22 2010, credit card issuers will have to start complying with the Credit Card Accountability Responsibility and Disclosure Act of 2009 that passed last year. Over the past months the companies have started preparing for this change by boosting interest rates and changing credit agreements ahead of the law changes.

Rate Increases

Credit Card promotional rates must be for at least six months. In general, rates on existing balances cannot be raised unless your payment is more than 60 days late.

If you are more than 60 days late and your interest rate goes up as a result, you can get the original rate restored if you make six consecutive months of on time payments.

Card companies must give a 45 day notice before increasing the interest rate and they cannot increase the interest rate for unrelated reasons. For example, if you are late on your electric bill or another card, the company cannot increase your interest rate.

Double Billing

It's not legal for credit card companies to charge interest twice on the same balance by collecting finance charges on current and previous balances.

Previously card companies considered your previous months balance when computing your finance charge. So if you had a previous month's balance of $1000 and paid $500, your next month's interest payment would be computing using the previous month's average or $750

Payment Timing

Consumers will be given more time to pay their credit card bill. Previously card companies were required to send bills 14 day before the due date. Today Credit Card companies must send you a statement at least 21 days before the payment due date. You cannot be charged a late fee if you can prove you mailed the payment in at least 7 days before the due date. When payments are for more than the minimum amount due, the additional money must be applied first to the highest rate balance.

Payment Protection

The new law requires credit card companies to process payments on the same day they are received. Which means that payments are considered on time if they are received on the due date or on the following day if the company was closed on the due date.

Credit Limits

Credit issuers can no longer automatically enroll you in over the limit protection programs that charge fees for letting you borrow more than you have been approved to borrow.

Credit issuers do have the option of letting your borrow more than your credit card limit for a fee, but the new law only allows them to charge only one over the limit fee in a billing cycle. Make sure you know how much you'll have to pay for that service that might not come cheap.

Annual Fees

Annual Fees cannot exceed 25% of the credit limit. This is to help people who are issued subprime credit cards.

All of these changes are great for consumers, it might make it harder for some people to get credit cards.