Seniors: Credit Card Law Changes in 2010

Feb 14th, 2010 | By Sharon Shaw Elrod MSW EdD | Category: Senior Finances

Changes in federal law will have a dramatic effect on credit card holders beginning February 22, 2010.  Some of the changes have already taken effect.  Since May 22, 2009 when President Obama signed the Credit Card Act of 2009, many of us received notice of changes from the banks that manage our accounts. 

The legislative intent was to create more transparency and easier-to-understand terms in the agreement we all must sign to apply for a credit card.  In addition, the law changes the way credit card issuers market, bill and advertise their product.

This is what happens on February 22, 2010:

  • The credit card interest rate will remain stable for the first 12 months, changing only if the agreement said it could change.  Penalties may be assessed for late payments.
  • Credit card interest rate changes may only apply to future purchases, not pre-existing balances.
  • This rule takes effect August 20, 2010:  Interest rate increases, and any significant change to your agreement, must be announced 45 days prior to taking effect, including penalty notices.
  • The double-billing finance charges cycles have been eliminated.  You may have noticed that your credit card bank can charge you interest on balances you have already paid.  They will no longer be able to maintain this practice.
  • You can now opt out (reject) certain significant changes in the agreement you sign when you apply for the card.  If you do this, the account will be closed and you will have at least five years to pay the balance.
  • Subprime credit cards, generally offered to those with bad credit, will have limits on fees that can be charged for applying for the card.  Fees will be limited to 50% of the credit limit, and only 25% of those can be charged when the account opens.  Remaining fees have to be spread over five billing cycles.
  • Billing statements have to be sent 21 days (3 weeks) before payment is due.
  • On-time payments are those received by 5:00 PM on the due date. 
  • Payments received the next billing day after a weekend or holiday are on time.
  • Payments above the minimum are applied to the highest interest rate balances.
  • Your billing statement must now include information about how long it will take you to pay off the balance you owe, and how much it will cost you in interest if you only make minimum payments.
  • Credit cards cannot be issued to anyone under 21 unless an adult co-signs the application or the person can show proof of enough income to pay what is charged on the card.
  • Credit card companies cannot raise your interest rate if you default on an unrelated account (e.g., utility company); this relates only to existing balances, not future balances.
  • You have to opt in to over-limit fees.  If you do not, any transaction you attempt may be rejected if it will exceed your credit card limit.

Additional information is available on these websites:

Details of the Credit CARD Act of 2009

FDIC Consumer News

Forbes.com



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