What is the Card Act?

If you are a longtime credit-card user in Nashville, you should have noticed a few changes in your billings as a result of the Credit Card Accountability and Disclosure Act, or Card Act, passed in 2009. No longer are you socked with substantial fees and interest-rate hikes for indiscretions such as making a late payment, going over the credit limit or carrying a balance on your card. In fact, there are several benefits to consumers from this law, many of which you may not be aware.

NerdWallet reports that the act installs restraints on the practice of “universal default,” a method of credit-card issuers to hike interest rates on all your credit-card balances when you made a late payment on one account. The Card Act bars companies from boosting the interest rate on new balances for a full year after the account is opened and bans rate increases on existing balances too. As part of the restrictions, issuers must notify cardholders at least 45 days in advance of any bumps in the interest rate. Other protections found in the act include:

  • Double-cycle billing: Issuers are banned from using the balances of two billing cycles to calculate monthly interest charges, which generally boosted interest charges.
  • Late fee charges: Since January 2017, fees are limited to $27 for the first payment that is late and $38 for ongoing late payments within a six-month period.
  • Over-limit fees: Consumers must choose to allow the issuer to approve transactions over their limit, which essentially takes away their reason for charging over-limit fees.
  • “Fee-harvesting” cards: People with bad credit could typically only get high-cost credit cards with low borrowing limits. The act mandates that issuers limit fees such as annual enrollment and maintenance charges to no more than one-fourth of the card’s initial credit limit in the first year.
  • Billing practices: Issuers must mail statements 21 days before the due date, which must be on the same day of each month.

In addition to cleaning up these practices, the Card Act calls for card issuers to consider an applicant’s ability to make payments. Issuers must now review an applicants’ income and debt amounts before approving a new account.

Lawmakers also mandated that monthly statements disclose how long it will take cardholders to pay off a credit balance making only minimum payments and make clear disclosures of payment due dates, penalty rate hikes and late fees.

This article contains information of a general nature and is not intended to be legal advice.

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