If you use a credit card, new rules protect you, whether you pay off the balance when the bill comes (54% of you, according to a Consumer Reports survey) or make the minimum payment. Portions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 -- often called the Credit CARD Act -- are effective February 22, 2010. Other provisions will become effective in August.
Here's what to look for:
- Before you open an account, the terms must be clearly disclosed
- A promotional rate must stay in effect for at least six months
- Rates can't be raised on new accounts in the first year, unless you are 60 days late with your payment
- After 12 months, if your rate is increased, it will apply only to new charges, not an existing balance
- Rates can't be increased on existing balances unless you're at least 60 days late
- No over-the-limit fees, except if you agree to them ahead of time
- Co-signers are needed for credit card applicants younger than 21, unless they can show they have sufficient income to repay the debt
[AD]Because the CARD Act halts a number of practices that were highly profitable for credit card issuers, be aware that some may try to make up for lost revenue in other ways. For example, the New York Times reports that an issuer of private label credit cards for specialty stores plans a $1 monthly surcharge to customers who elect to get account statements by mail. Watch out for other fees that may pop up that may violate the spirit of the law, if not the letter.
In response to the new rules, many credit card issuers ramped up their rates and increased late fees last summer. If your rate has ballooned -- many major credit cards now carry an annual percentage rate of 29.99% -- take action:
- Check with your credit union about a balance transfer or a consolidation loan. But don't automatically close your old account, as credit cards you have held the longest contribute the most to your credit score. If you choose to close the old account, ask that the notation "closed at consumer's request" be added to your credit report.
- Call the credit card company and negotiate a lower rate or ask that part of the debt be written off. If some of your debt is forgiven, however, note that this will negatively affect your credit score and that you must pay taxes on the amount that is forgiven.
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