It was signed into law last May 22 by President Obama but the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 officially went into effect last August 20. And that’s just the first phase of it.

Legislators put these new credit card reforms into place in an effort to overhaul the credit card industry and protect consumers from the so-called abusive practices of banks and credit card issuers, making sudden hikes in interest rates, imposing seemingly unreasonable fees, and cutting credit card limits without due notice.

Not all provisions in the Credit CARD Act have already been implemented as this is only the initial stage, but for those that are already in effect, they do provide some relief to credit cardholders.

New Rules in February 2010

As encouraging as all these may already sound to the average consumer, there is certainly more to come when the second phase of the Credit CARD Act is implemented come February 2010. In fact, the still-to-be-implemented provisions are even more consumer-friendly than these first two which are said to be only “icing on the cake.” The following new credit card reforms are part of the “cake” coming early next year:

  • Credit card issuers will no longer be allowed to increase interest rates on existing card balances. Exceptions to this however, are if a raise is clearly stipulated on the credit agreement, or if the cardholder is already more than 60 days delinquent on his account.
  • Individuals below 21 years of age will be required co-signors and will have limited credit limits.
  • Credit card companies are prohibited from raising interest rates within the first year of the card unless specified in the contract.
  • Card issuers could be required even earlier notice for any interest rate hikes on new purchases.

While the new Credit CARD Act is designed for Americans to keep from falling further into debt, it’s no magic wand that can erase your money troubles in a snap. The key here is still to manage credit wisely by not spending more than what you earn, refraining to use the credit card for impulse buys, paying your bill on time, and always paying more than the minimum.

Comparing the old and new laws, here are the two major changes that financial institutions should have implemented last Thursday and how these new credit policies can help consumers:

Billing Statements

Old: Card statements should be mailed at least 14 days before due date.

New: Billing statements should now be mailed at least 21 days before due date.

How this helps: The additional one week given to card users to peruse their billing statements should be ample enough time to check if everything is in order, and if there are no untoward charges reflected on the bill.  And with the statement mailed earlier, the chances of a cardholder not receiving it on time and consequently, getting slapped with late payment charges, will be greatly reduced.

Changes in interest rates and other terms

Old: Cardholders should be notified at least 15 days before any significant changes can be made in the accounts.

New: Cardholders should be given a 45-day advance notice before changes in rate and fees can be implemented.

How this helps: The 6 weeks early notice afforded to card users about any interest rate hikes, or additional fees to be charged will certainly be of assistance as you are now given enough time to check how the adjustments will affect your finances, and more importantly, to look for better options.

Further, the notice must also include that in case you find the adjustments in rates or fees unacceptable, you now have the option to cancel the card before the date the changes are effective, and pay back the remaining balance on your card using the current rate, with a repayment period of up to 5 years.

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