Credit Secrets & Tips

Unexpected rate hikes. Over-limit fees. Double-cycle billing. Those are just a few of the credit-card practices that have trapped millions of consumers into a life of constant worry over mounting debt.

In less than a week, these practices will be history.

On Feb. 22, 2010, the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) takes effect.

It puts forth new rules for credit-card issuers that are arguably the most consumer-protective in the history of credit cards.

If you’re the type of person who reads every piece of mail sent by your credit-card companies, then chances are you already have a fair idea of the changes coming. (Credit issuers have been mailing out change-of-terms notifications that explain the details in recent weeks.)

Then again, credit-card rules are hardly ever simple — and the CARD Act is no exception.
Below are the key changes that the new law puts forth, along with some notable exceptions that could still allow consumers to get in trouble with their credit cards

Finance Charges, Interest-Rate Hikes and Notifications

• No rate increases for the first 12 months after opening an account.
• Rate increases can only be applied to new charges.
• Annual and application fees cannot exceed 25% of your initial credit line.
• No more double-cycle billing.
• A six-month minimum promotional-rate period.
• No more over-limit fees, unless the card holder opts in.
• No fees to make credit-card payments online or over the phone, unless you make a payment on your due date.
• Must give 45-day notice of pending rate or fee hikes or any other significant changes to credit-card terms.

Billing Statements, Payments and Disclosures

• Billing statements must be sent 21 days before the due date.
• Your due date should be the same date each month.
• Payments are considered on time when received by 5 p.m. on the due date or the next business day after a holiday or weekend.
• Payments above the minimum must be applied to the highest-rate balance first.
• Each monthly statement must include information on how long it would take you to pay off your balance if you make minimum payments only and the total you’ll pay, including interest and principal; and how much you need to pay each month in order to pay off your balance in 36 months and the total you’ll pay, including interest and principal.
• Statements must also include a warning that by making only minimum payments you will pay more interest and it will take you longer to pay off your debt, as well as a toll-free number to call if you want to be referred to a credit-counseling service.

College Students and Young Adults

• No credit cards for college students unless co-signed by a parent or they can demonstrate “ability to pay.”
• No credit-limit increases if you are under 21 and have a co-signer without that co-signer’s permission.
• No credit-card marketing and freebies on college campuses.