The CARD Act:
What You Need to Know
On May 22, 2009, President Obama signed the Credit Card Accountability, Responsibility, and Disclosure Act, or the Credit CARD Act, into law. The CARD Act expands existing Truth in Lending guidelines to help make sure that the terms on every credit card are fair and clear.
These new laws are in effect starting on different dates between August 20, 2009, February 22, 2010, and August 22, 2010.
To help our members better understand the new regulations, we have summarized the key changes below, including:
Monthly Payments
Get a better understanding of how your bill is calculated and how your payments are applied.
Payment allocation is how we apply your payment to your balance when you have more than one interest rate e.g. you take advantage of a promotional rate for a balance transfer.
New law: After February, 2010, any amount you pay over the minimum payment must be applied to your highest rate balances first.
What changes for you? If you pay more than the minimum payment, we will pay down your higher-rate balances first … which means you will pay less interest over time.
Double-cycle billing is the way some other credit card companies calculate the monthly interest charged on an account. It uses the average daily balance for a two-month period, which sometimes means higher interest charges for you.
New law: Double-cycle billing will be banned.
What changes for you? Absolutely nothing. We have never used double-cycle billing.
Monthly Statements
Look for all of your credit card statements to give you more information about your account—and for that new information to be even more helpful.
Format Enhancements
Your statement already includes many helpful sections and details:
- Clear call-outs of the most important information to you. Like your transactions, fees, minimum payment and due date.
- Consumer-friendly explanations so you will know exactly how your balance was calculated.
- Clear summary of your CURewards earned per cycle.
You will find that the new information in your statement will make it even easier for you to understand your account and make decisions about it. You can look for:
- The estimated time it will take you to pay off your balance by making only the minimum monthly payment.
- The amount you would need to pay monthly to pay off your balance in 36 months.
- Clear late payment warnings.
- Summary of year-to-date fees and the interest you have paid.
- Predictable due dates
New law: Effective after February, 2010, your credit card bill must be due on the same day of the month, every month.
What changes for you? To help you plan ahead, we will now make sure that your credit card bill is due on the same day every month.
Earlier Delivery
New law: Statements must be mailed 21 days before monthly payments are due.
What changes for you? Nothing. You will still receive your statement just as you do now—you may even get it a few days earlier.
Over-the-Limit Fees
You will now have more flexibility and choice when it comes to managing your credit limit.
New law: In the future, you may not be allowed to go over your credit limit unless you agree in advance to this service. As in the past, there will still be a over-the-limit fee.
What changes for you? If you want to Opt-In to retain the flexibility to go over your limit, you will have to give us permission in advance.
Interest Rates
Interest Rate Changes
The CARD Act calls for more protection against changes to your interest rate.
New law: After February, 2010, credit card companies cannot raise interest rates on existing balances or accounts that have been open for less than a year, except when:
- An introductory or promotional rate ends on a set date. Promotional rates must last for at least 6 months.
- You have a variable rate.
- You are more than 60 days late in making a payment.
What changes for you? We will be making these changes to our policies and procedures to comply.
New law: You must be notified, in writing, at least 45 days before a significant change is made to your account—and a reason for the change must be provided. You can decline these types of changes and close your account by contacting your credit card company.
What changes for you? Nothing. You can continue to count on our policy to notify you of changes to your account at least 45 days in advance. We will continue to keep you informed about any changes to your account in a clear and timely manner.
Youth Marketing
New rules designed to help college students, young adults and their families make smart financial choices.
Marketing on College Campuses
New law: Credit card companies will no longer be able to give college students free giveaways as part of their campus marketing.
What changes for you? Nothing. Dominion Credit Union does not market credit cards on college campuses.
Other:
Subprime Credit Cards for People with Poor Credit
People who get subprime credit cards and are often charged account-opening fees that eat up their available balances would get some relief under the new law. These upfront fees cannot exceed 25 percent of the available credit limit in the first year of the card.
Changes for you? Nothing. Dominion Credit Union does not charge any account-opening fees.
Miscellaneous Unintended Consequences
Annual Fees
The free ride is likely to end for many who use their credit cards as a convenience and pay off their balances in full every month. Squeezed by the economy and further by this law, banks will now target people who have avoided paying an interest charge or an annual fee — until now.
What changes for you? Nothing. Dominion Credit Union does not charge an annual fee.
Lost Grace Period
Trying to make up for lost revenue, banks are considering charging interest from the date of a purchase instead of allowing a grace period, now typically 20 to 25 days. The best that cardholders may be able to hope for is an option from their issuer: Either pay an annual fee or lose your grace period.
What changes for you? Nothing. Dominion Credit Union currently offers a 25-day grace period.
Other Fees & Penalties
The new regulations put no restrictions on fees for balance transfer, cash advance or late payment. All are likely to rise. Currently, most card companies impose penalty rates averaging about 28 percent, or double the average standard rate. But that could rise to 30 or 35 percent as the companies scramble to make money where they can. Balance transfer fees at banks are already 3-5% on average, which is likely to rise.
What changes for you? Nothing. Dominion has no plans on implementing any fees for balance transfers, or cash advances.
The Bottom Line
Read the fine print. Know what changes are occurring on your credit cards. And, remember that your credit union is committed to maintaining member-friendly terms, low rates, and a straight-forward card you can trust.
