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Learn More About the Changes Made to Credit Cards

Learn More About the Changes Made to Credit Cards

On May 22, 2009, President Barack Obama signed the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 into law. Congress passed the Credit CARD Act to protect consumers from unfair practices by credit issuers. The law passed with a great deal of bipartisan support in both the Senate and the House of Representatives.


The provisions of the Credit CARD Act of 2009 are listed below.

  • Limited interest rate increases. Interest rate hikes can only take place when a promotional rate expires, the rate is variable, or if the consumer pays late. Changes in the terms of an account cannot take place without notice 45 days in advance.
  • Reasonable time to pay card bills. Consumer must have at least 21 days to pay their bill after the issuer mails or delivers the statement.
  • Payments applied to highest-interest balance first. Card issuers must apply the payment to the balance with the highest interest rate first.
  • Restrictions on over-the-limit fees. Issuers may only charge consumers over-limit fees if the consumer has opted in to allow over-limit transactions to proceed. Otherwise, the transaction must be denied and no fees may be charged.
  • No double-cycle billing. Double-cycle, or two-cycle, billing is prohibited. This billing method hurts consumers who pay their balances in full because they still have to pay finance charges on a balance that they’ve already paid. The law also limits subprime fees, with up-front charges limited to 25 percent of the credit limit during the account’s first year.
  • Minimum payment disclosures. Creditors must disclose to the consumer the consequences of paying just the minimum payment every month; namely, the number of months it would take to repay the balance making only minimum payments. Companies must also tell consumers how much they must pay every month if they would like to repay their balance in 12, 24, or 36 months.

Effective Date

Originally, the Credit CARD Act was set to take effect on February 22, 2010. However, skyrocketing interest rates have resulted in the creation of legislation that would move the effective date of the law up to December 1, 2009. During the first six months of 2009, credit card interest rates increased by 20 percent even though federal interest rates decreased. Lawmakers believe issuers have begun raising the rates of existing consumers in order to compensate for the lost revenue they anticipate when the new law takes effect. The earlier effective date has encountered opposition from powerful financial leaders, including Federal Reserve Chairman Ben Bernanke.

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