Credit Card Reform Act of 2009 - What It Means to You?

Some are calling the Credit Card Reform Act of 2009 THE most significant legislation since
1968, and it couldn’t be more timely as consumers struggle under the weight of 950 billion in revolving
credit card debt. Last quarter alone credit card delinquencies of 90 days + rose 11%. If you have
consumer credit cards or are thinking about being approved for credit cards, here ’s what it means to you:

CASH: You’ll be saving more of your hard earned money because you’ll be paying less interest and fees to your credit card company. When I say less interest, that does not mean this bill caps interest rates nor does it limit when APR’s (annual percentage rates) can be hiked on future purchases. Here’s how it does put more cash in your pocket:
A. Interest rate hikes on existing balances will be allowed only under limited conditions, such as when a promotional rate ends, there is a variable rate, or if the cardholder makes a late payment such as 60 days. Interest rates on new transactions can increase only after the first year.
B. Higher interest rate balances will be paid first when you pay more than the minimum payment.
C. Universal default, the practice of raising interest rates on customers based on their payment records with other unrelated credit issuers (such as utility companies and other creditors), will end.
D. Double billing cycles where finance charges on outstanding credit card balances are computed based on purchases made in the current cycle and the previous billing cycle will end.
E. Penalty fees like over the limit fees and late fees must be reasonable and phone and internet payments will no longer involve a fee.

Communication. Your credit card company will now have to do the following:
A. Effective 8/20/2009 they have to give you 45 days notice of a rate change so you have time to pay it off or do a balance transfer.
B. Payments will be due at least 21 days after they are mailed or delivered. Consumers have complained about due dates that change without notice or are moved up, giving them less time to pay their bills and increasing the likelihood of late fees.
C. Credit card issuers will no longer be able to set early morning or other arbitrary deadlines for payments. Cutoff times set before 5 p.m. on the payment due dates will be illegal under the new law. Payments due at those times or on weekends, holidays or when the card issuer is closed for business will not be subject to late fees.
D. Credit card issuers must disclose to cardholders the consequences of making only minimum payments each month, namely how long it would take to pay off the entire balance if users only made the minimum monthly payment. Issuers must also provide information on how much users must pay each month if they want to pay off their balances within 12, 24 or 36 months, including the amount of interest.

Caution: If you are 21 year olds or younger, being approved for credit cards will be tougher.
A. You will now be required to prove you can repay the credit card, or you must have a parent or guardian promise to pay off your debt if you default.
B. The new law will also prohibit the free pizza and T-shirt giveaways the credit card companies used to entice students to sign up for credit cards.

Keep in mind all the specifics of this law go into effect February 22, 2010. Until then expect the credit card companies to raise your interest rates and fees and lower your credit limits.