Rights As a Credit Card Applicant
Federal laws are in place that are intended to protect credit-card applicants from paying exorbitant fees and to keep their interest rates from climbing shortly after they open their accounts. Yet there are exceptions to the rules outlined in federal laws. Therefore, applicants who do not understand a company's credit terms could end up paying high fees and interest rates despite the regulations.
Other People Are Reading
-
Credit Terms
-
The U.S. Fair Credit and Charge Card Disclosure Act requires companies offering credit cards to inform applicants about the terms of their cards. Among other things, applicants should receive information on the annual percentage rate (APR), interest-free period and annual fee. The APR is the yearly interest rate applied to the cardholder's balance. Card issuers charge their customers a fraction of that annual rate on their monthly statements. The interest-free period is the time allotted for paying off a credit-card balance before any interest charges accrue on purchases. Card issuers may or may not charge an annual fee, which essentially is a service fee customers pay just for having a credit card.
Interest Rates
-
The U.S. Credit Card Accountability, Responsibility and Disclosure (CARD) Act generally prevents card issuers from raising applicants' interest rates the first year after they open their accounts. However, card issuers can override that rule in some instances. For example, new cardholders who are more than 60 days late in making a payment can have their interest rates increased even if their accounts are not a year old.
-
Fees
-
The Credit CARD Act also places caps on application fees and other initial charges that some card issuers require applicants to pay. The law says such fees cannot total more than 25 percent of the applicant's initial credit limit. Therefore, someone who gets an opening credit limit of $1,000 cannot be charged fees for the first year that exceed $250. Nonetheless, new cardholders who exceed their credit limits or make late payments can be charged penalty fees even if those charges exceed the 25-percent fee cap.
Considerations
-
An amendment to the U.S. Fair Credit Reporting Act took effect on January 1, 2010 regarding risk-based pricing rules. Risk-based pricing is a practice lenders use in determining consumers' credit and loan terms based on their creditworthiness. Information in a person's credit file usually affects their decisions. The amendment requires lenders who reject credit applications or offer applicants less favorable credit terms to explain the reasons for such decisions.
-
