Consumer Credit Act Definition

When the last provisions of the U.S. Credit Card Accountability, Responsibility and Disclosure, CARD, Act took effect in August 2010, a White House blog post called the act the "Credit Card Bill of Rights." The post asserts the legislation ended "unfair rate hikes and hidden fees" for credit card users. However, one of the best ways to define the act is by determining how it does and doesn't protect you when using credit cards and dealing with card issuers.

Interest Rates

Credit card companies may raise their interest rates for several reasons, but the Credit CARD Act puts limitations on how payments are applied to customers' accounts when interest rates are raised on new balances. A post to "The New York Times" "Bucks" blog notes that account payments made above the minimum monthly payment generally must be applied to the balance with the highest interest rate. According to the blog post, some people who monitor the credit card industry say such changes are causing issuers to raise minimum monthly payments and increase some fees to bolster their revenue.

Penalty Fees

Penalty fees for making late payments are largely limited to $25 by the Credit CARD Act, unless one of a customer's last six payments was late. In such cases, a card issuer can charge a late fee of up to $35. The Bankrate.com Credit Cards Blog notes that issuers can still exceed the legislation's cap on penalty fees if they can prove to the U.S. Federal Reserve Board that a higher fee is justified based on the costs they incur due to customers' late payments.

Inactivity Fees

Credit card companies can no longer charge people inactivity fees, where customers essentially pay charges for not using their credit cards as much as their card issuers want. Yet the Bankrate blog warns that not using a card can affect consumers in other ways. Card issuers can still reduce your limit or close your account if you rarely use your credit cards.

Payments

In its explanation of the Credit CARD Act changes, the U.S. Federal Reserve Board notes how customers' payments are affected. For example, a credit card company must deliver its customers' bills at least 21 days before their payments are due. Furthermore, if a payment due date is on a weekend or holiday, customers have until the next business day to pay their bills because companies usually don't process payments on weekends or holidays.

References

• The New York Times: Bucks blog: What the Credit Card Act Means for You; Jennifer Saranow Schultz; 2010
• U.S. Federal Reserve Board: New Credit Card Rules
• U.S. Federal Reserve Board: New Credit Card Rules 2
• The White House Blog: Your Credit Card Bill of Rights Now in Full Effect
• Bankrate.com: 3 Issues CARD Act Doesn't Cover