In these recessionary times, millions of Americans have found themselves drowning in one of the most expensive types of debt out there -- credit card debt. Thanks to the Credit Card Act of 2009, however, relief is on its way. Come February 22, 2010 (and potentially as soon as December 1, 2009) there will be new consumer protections put in place. This legislation has something for everyone.
1. ARE YOU UNDER 21? This regulation will help you save yourself from yourself, by restricting your access to credit cards. Gone are the days of free tee-shirts and pizzas in exchange for signing up for a credit card on America's college campuses. Credit card companies will no longer be able to issue credit cards to individuals under the age of 21 unless they either can provide proof that they can repay the money they are borrowing on that card or have a parent (or someone else over age 21) co-sign and agree to be responsible for that debt. Right now the average college student is graduating with over $3,000 of credit card debt so having this temptation removed is huge.
2. ARE YOU TRYING TO ESTABLISH YOUR CREDIT HISTORY? This regulation restricts all interest rate hikes during the first year a card has been issued. Unless you have a card with a variable interest rate, card issuers can no longer raise your interest rate in the first year after a new account is opened. The only exceptions are if the card was opened with a clearly stated promotional rate for at least 6 months or if you go more than 60 days without making your minimum monthly payment.
3. ARE YOU JUGGLING EXISTING CARDS? This regulation puts in all kinds of speed bumps you'll like. The interest rate on your existing debt can't be raised unless, once again it's a variable interest rate, the end of a promo period, or you are over 60 days late on your minimum payment (for any of these reasons you do not have to be notified). On top of this, for future debt that you may accrue on fixed rate cards, issuers have to give you 45 days notice on any rate changes. Issuers can no longer charge over-the-limit fees unless you've specifically asked to have your account set up to allow transactions over your credit limit. Two-cycle billing is now banned. And if you boo-boo and are 60 days late on a payment, after 6 months of on time payments the card issuer has to restore your prior interest rate.
4. ARE YOU DIGGING YOURSELF OUT OF DEBT? This regulation requires the fair application of payments. In the old days, paying off your credit card debt was akin to eating a layer cake with your fingers while blindfolded. By that I mean you'd send in a payment - but it wasn't always clear to you which layer of debt was being nibbled away at. More often than not, it was the lowest interest debt that got paid off first when you sent in that payment. Under the new rules it will be your highest interest debt that gets paid off first.
5. ARE YOU A GIFT CARD PACK RAT? This regulation will enable you to shop till you drop. It applies to both prepaid cards as well as retailer cards. The two biggest changes are that (1) You get a full five years from time of purchase (or whenever money was last put on the gift card) to use it - so no more surprise expirations and (2) As long as you've used the card once in the past 12 months, no "inactive" fees can be charged. (After 12 months of no activity you can be hit with 1 fee a month).