February 28, 2010
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My Thoughts on the Credit CARD Act
On May 22nd of 2009, President Obama signed the Credit Card Accountability, Responsibility and Disclosure (Credit CARD) Act of 2009. It wasn’t until a few days ago that I heard about it, and as a part of the 40% of Americans who carry a balance on at least one credit card the Credit CARD Act affects me directly. I found out about it when last week I received an email from Newegg.com Preferred Account which stated that changes had been made both to my statement and to their account management website. It was a bunch of legal jargon, but glancing through it peaked my interest (no pun intended).
In a statement, President Obama said “With this new law, consumers will have the strong and reliable protections they deserve. We will continue to press for reform that is built on transparency, accountability, and mutual responsibility.” But what is the Credit CARD Act exactly, and how does it affect us card carrying debtors? No worries, the effects of the act on consumers are as good as they are plentiful. I’ll outline a few of the benefits I find pleasing, and I’ll provide a link to the full text of the act, if you’re still interested.
The Best Parts of the Act (If you ask me):
- It’s the end of late fee traps – Institutions will have to give card holders a reasonable time to pay the monthly bill – at least 21 calendar days from time of mailing. There’s nothing I hate more than a Sunday due date. Come on people, the bank’s not open and the mail doesn’t come on Sundays! A Sunday due date means I have to send my payment out the preceding Thursday. I get paid via direct deposit on Thursdays, and my bills always go through before my paycheck, which means any amounts due on Sunday could potentially take my account into the red for a solid 4 hours (costing me $32) before my paycheck goes through when the bank opens.
- Requires Opt-In to Over-Limit Fees – Brilliant. Now if my credit card is $30 short of the limit and I run it for $30.01, the card will be declined rather than charged an additional $40!
- Plain Sight /Plain Language Disclosures – Credit card companies are now required to put on their statements how long it would take for the card holder to pay off the balance should the minimum payment be made each month, and how much in interest it would cost them. It also requires that the statement show how much per month, how much in interest, and how much total would be paid should the balance be covered in 36 months. This would’ve been helpful two years ago, although I should’ve taken the initiative to sit down and do the math. I paid the minimum payment every month for two years on one of my credit cards, and the balance went nowhere. $70 being the minimum payment, well, you do the math. That’s a lot of money wasted, and the 21.99% APY interest rate makes the amount wasted even higher. With this law I saw that to pay off my current balance paying only the minimum balance would take me 26 years and would cost me more than my credit limit in interest alone! Wow! I’m really hoping that this feature of the act will help a lot of people realize the problem they’re creating for themselves by paying only the minimum payment.
Here’s the link to the full text: http://www.whitehouse.gov/the_press_office/Fact-Sheet-Reforms-to-Protect-American-Credit-Card-Holders/
I’m excited to see how this will effect the American public, but from my point of view I think it’ll be nothing but good. What do you think?
Comments (2)
I’m hoping it will do a lot of good. I think, though, that our world and our nation is too set on using credit for purchases they can’t afford. At least now they are more transparent about it, and if people get into debt, they can’t use the excuse that they didn’t understand what they were doing.
@respawn87 - Exactly. I’ve heard of people being 100′s of THOUSANDS of dollars in debt to credit card companies, and I have to wonder what would make a person take it that far. I freak out if my credit card goes over it’s $500 limit, but not enough to apply for another one to cover the balance. I paid 70 bucks a month on my 22% interest credit card for two years before I realized the balance hadn’t gone anywhere. I think this act will show people that holding a credit card balance doesn’t mean paying the minimum every month.