News Release Distributed 03/16/10

People are still trying to figure out what the new Credit Card Accountability, Responsibility and Disclosure (Credit CARD) Act of 2009, which went into effect in February, means to their pocketbooks.

LSU AgCenter family economist Jeanette Tucker says the act should help with financial management because consumers should have a clearer picture of their credit.

“Credit card companies will now have to communicate with us better,” Tucker said.

Tucker explained that with the new rules, credit card companies will have to give a 45-day notice before increasing interest rates, changing certain fees or making other significant changes to the terms of your card.

The act also has provisions that protect new cardholders and underage consumers.

“Credit card companies cannot increase the rate for the first year on a new account,” she said, adding, “with a few exceptions.”

Increases can occur if:

– The card has a variable interest rate tied to an index, and the index goes up.

– There was an introductory rate that can revert to the normal rate after six months.

– The consumer is more than 60 days late in paying the bill.

Consumers under 21 will have a harder time getting a credit card.

“Applicants under the age of 21 will have to show that they have a job and can make the payments, or they will have to get a cosigner,” Tucker said.

Tucker added that a cosigner must agree in writing to increases in the credit limit.

Another provision will add a new feature to monthly credit card statements.

“One feature I like about this bill is that it requires credit card companies to tell you how long it will take you to pay off your balance,” she said.

The statement will tell consumers how much they would need to pay each month to pay off the balance in three years. The consumer will see how much they will pay in interest and how much they could save by paying more than the minimum.

“This should be an eye-opener for some people and will, I hope, encourage them to pay extra and save money in the long run,” Tucker said.

Tucker also pointed out that because of the act, bill delivery and payment dates and times have been standardized.

Credit card companies must mail out or deliver a bill at least 21 days before it is due. The date the bill is due must be the same day each month and the payment cut-off time cannot be before 5 p.m. in the company’s time zone on the due date.

Two other positive points in the act are caps on high-fee cards, which limit fees to no more than 25 percent of the initial credit limit, and a regulation that directs payments to the highest-interest balances first.

While the new law will prohibit certain practices and provide more timely disclosures of account terms and costs, Tucker said consumer still need to do their part to manage their credit cards.

“It is critical to understand the terms of a credit card before entering into a card agreement,” she said. “Also, closely review your credit card bill each month and monitor account changes communicated by your credit card company.”

Additional provisions of the act go into effect in August.

Tobie Blanchard