New credit card laws go into effect - KCBD NewsChannel 11 Lubbock

2/22/10

New credit card laws go into effect

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By Tiffany Pelt - email

LUBBOCK, TX (KCBD) - Look out consumers, new credit card laws take effect on Monday. The new laws are supposed to help protect consumers from credit card companies, but it has its consequences too.

President Obama signed the credit card rules into law last spring under the Credit Card Accountability , Responsibility and Disclosure Act (or Credit CARD Act of 2009). He says it's shifting power back to the consumers and holding the credit card companies accountable. Even though the new rules are to benefit consumers, the new changes could mean more charges to your cards.

Card holders must be warned 45 days before interest rates are raised. Those rates can only go up after the first year, and can only apply to new transactions. Now when cardholders pay more than the minimum payment, the excess paid will go toward the balances with higher interest rates

If you're under 21 years old, you can forget about getting a credit card. That is, unless a parent co-signs or there is proof you can repay it.

"A lot of people get credit cards when they're very young and they have no way of actually paying them and it either leaves their parents to pay it or it goes into bad debt, so that's actually a very good thing," says Crystal Gomoke, Certified Consumer Credit Counselor.

Over-limit fees are now prohibited unless the card holder opts in for overdraft protection. If not, transactions exceeding the credit limit are rejected and you will not have to pay "over-the-limit fees". You can also opt out of the credit card service if you decide to reject any significant changes in the terms of the service. Your account will be closed, and you will continue to pay off your balance under the old terms.

The new rules also give credit card users more time to make payments on their bills. Rather than 14 days, you now have 21 days after the bills are mailed to get your payment in. Laws dealing with cut off times and deadlines have also been tweaked to avoid credit card companies from tacking on unnecessary fees.

By saving consumers money, the new laws could cost credit card companies billions of dollars -  leaving them to find new ways to make up for it.

"They'll make up that money by being much more careful about who they lend money to. So it may be much harder for people to get credit in the future. They're also going to charge more fees on things like inactivity, annual fees, and late fees will probably be higher than in the past," says Gomoke.

Spending limits are also expected to go down and interest rates are expected to hike across the board with no limit on how high they can go. The difference now is they have to give customers ample warning before increasing the rates. 

The real key is to read the fine print.

"That's the big thing, you have to pay better attention to what's on your statement and how the money is applied and how much you owe," says Gomoke.

These protections don't apply to corporate or business credit cards, and more changes are on the way. A few more laws under this act go into effect in August, including regulations on gift cards.

©2010 KCBD NewsChannel 11. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

 

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