How Will the New Credit Card Law Affect You?

By Katelyn Hayes   

Thanks to new legislation, the days of abusive credit card company practices wreaking havoc on consumers' bank accounts are numbered. A new bill was passed in Congress and signed into law by President Obama on May 22, 2009, with most provisions set to go into effect February 22, 2010. The bill takes aim at the often-shady practices credit card companies use to squeeze the most money out of their customers. The new credit card law creates a more transparent and customer-friendly set of rules that credit card companies will have to follow.

New credit card law regulations

The new credit card law will give card holders more warning, more leniency and (hopefully) more information before card companies can drastically change a cards terms. Read on for a list of changes you can expect to see.

• Credit card companies must wait 60 days before they can levy a penalty interest-rate increase on late bills.
• Card issuers can't raise existing balance rates unless you're more than 60 days late on your account.
• Customers must get least 45 days' notice before companies can raise interest rates.
• Bills will arrive 21 days in advance of their due dates. Currently, cardholders typically get bills only 14 days before they're due.
• You'll have until 5 p.m. the day your bill is due before the payment is considered late. Many companies have been using early-morning deadlines. This new regulation will ensure that payments arriving in the afternoon mail aren't counted as late.
• Card companies must also be lenient if a bill's due date falls on a Sunday, holiday or any other day that mail isn't delivered. It'll be accepted the next day without penalty.
• Some cards carry different interest fees for different types of transactions (e.g., cash advances, balance transfers and purchases). From now on, banks will have to apply any money you pay over the minimum payment to the outstanding balance in your account that carries the highest interest rate.
• Banks will have to ask you in advance if it's OK to exceed your credit limit. Currently, banks simply let you to go over your spending limit and then charge you a fee for doing so.
• Your interest rate on existing balances can only be based on your transaction history with the credit card company. That seems simple enough, but at the moment, "universal default" clauses allow credit card companies to raise interest rates based on your payment history with other companies — even utilities. That practice isn't going to fly under the new credit card law.

New student credit card rules

• It's about to become a lot harder for students to secure a credit card. In the future, anyone under the age of 21 will need a parent, guardian or spouse to be the primary cardholder.
• Working students will need to provide proof of employment to obtain a card on their own.

New gift-card rules

• Retailers and credit card company gift card will need to explicitly display the date that dormancy fees (i.e., the charges that card companies impose if you don't use your card within a specified time frame) kick in. These fees can't be imposed unless the card isn't used for at least 12 consecutive months. (This rule doesn't take effect until August 2010.)
• Gift cards will be valid for at least five years before they can expire.

Some experts believe that there could be a downside to the new credit card law — like the rising annual fees and dwindling rewards programs. For now, though, perhaps we can enjoy a collective sigh of relief over the new regulations being imposed upon the credit card companies.