The new CARD consumer credit protection act takes effect next week—and not a moment too soon.
We’re still in a feeding frenzy of credit car companies raising interest rates through the stratosphere while they still can.
Now, hopefully, those ridiculous rates will slow down. I recently heard of one that was 250%! Most us have experienced rates of 36% or even 44% despite good credit scores and pristine payment histories.
One of my companies recently reduced my credit limit from $9,500 to $500 just because I hadn’t used the card for a few months. I decided to vote with my feet since they had initiated a hit to my credit score, I’d just bite the bullet and say goodbye to them.
The new CARD act doesn’t mean that your credit card company can’t still put the screws to you, but there are some limits.
Here’s what you get starting next week:
• Banks must give 45 days notice before raising the interest rate on future purchases.
• Your interest rate on existing balances can’t be raised until you’re in default for 60 days.
• Your monthly statements going forward will reflect how many years you’ll be in debt if you only make minimum payments.
• Any annual fees must be capped at 25 percent of your card’s limit.
• If you have multiple interest rates on your account, anything you pay over the minimum balance will be applied to the highest rate first. But beware, if you only pay the minimum, the money will still be applied to the lowest balance first.
• Teaser rates on new cards must be honored for one year.
* Credit won’t be extended to people under 21 without a co-signer, except in very specific circumstances.
• Two-cycle billing will no longer be allowed. This was a sneaky way that banks would charge massive interest if one month you paid in full and the next month you didn’t.
