Credit companies are changing their ways... and the good news is these new rules are consumer-friendly changes that will help you "play your cards right!" The Credit Card Accountability Responsibility and Disclosure Act of 2009 takes effect on February 22, (nicknamed the CARD ACT). It will make the "terms of conditions" --- in other words, what you are agreeing to --- much easier to understand and therefore easier to manage and control!
Let's break down --- What it means to YOU!
- APR: You already know your annual percentage rate can go up OR down! After Feb 22, your credit card issuer has to give you a head's up before they can increase your rate --- 45 days' notice! And if you're able to change your rate in your favor by negotiating a lower APR, the credit card issuer has to lower your rate immediately.
- New cards: Interest rates on brand new credit cards are not supposed to change for one entire year under this new law. At that point, they can charge the higher rate only on new purchases, not your existing balances. BUT pay attention here, credit card issuers seem to be taking advantage of loopholes! For example: If you are more than 60 days late making the minimum payment, they can still jack up your rate.
- Balance Transfers: Now, you know how there are always two distinctly different rates on balance transfers and purchases? Well, The CARD Act requires issuers to apply your payment to the balance with the higher rate now versus just paying off the lower rate first.
- Unrelated items: Hey, you upped my credit card rate because I paid my mortgage late??? Not anymore, the card companies can no longer increase your rate and punish you for paying a completely unrelated bill late.
- Kids & Credit: When are these credit card companies going to stop going after my kids in college!? It's the battle cry of many a parent! If you're in college or have kids in college - be aware that card companies won't be making credit as available. If your student is under 21, he or she can get a credit card only if an adult cosigns or if she can prove she has adequate income to pay the bill. If the parent decides to cosign, they accept responsibility for all expenditures
When it comes to college and cards - go debit all the way. If you think your 19-year-old needs a credit card for emergencies, let them sign up for the kind where they deposit their own funds into the account. These are called "secured cards," so kids just starting out can build credit but are really only spending their own money in process versus borrowing.
What about the not-so-stellar news? Credit scores will need to be higher to qualify for new cards. Plain and simple. And it's actually not a bad rule at all... Think about it, if you're already behind on payments to other lenders, why on earth do you want more credit in your name?
About Pam Krueger
Pam Krueger, executive producer, co-host and creator of the award-winning MoneyTrack series on public television and winner of a 2009 Gracie Award of Individual Achievement brings her knowledge and can-do attitude to viewers nationwide, educating the public on exactly what works and what doesn't when it comes to investing. For nine years, Pam worked as a stockbroker, spending much of her time simplifying the world of investing for her clients. Recognizing the increasing need for investor education, she made the leap to broadcast television by producing and reporting for numerous financial programs, such as ABC-TV's Emmy®-Award-winning MarketPlace and Tech-TV's The Money Machine. Her first book, "The MoneyTrack Method" [Wiley & Sons] released in October 2008 with annual editions slated to complement each season. Krueger also serves as the official spokesperson for the California Jump$tart Coalition, an organization dedicated to increasing financial literacy among children and teens. She lives in Tiburon, California, but spends much of her time in Osterville, on Cape Cod, Massachusetts.