How Have Credit Card Rules Changed?

We looked at the most important aspects that are considered when determining our credit score. Today, we will look at how the government hopes to reform some of the corrupt practices that the credit card industry has used against borrowers.

It is important to understand the changes that are happening in the credit card industry. Even borrowers with great credit have found themselves negatively impacted.

For example, millions of consumers were hit with reduced credit limits on their credit cards. These reductions came even if the consumers were not considered "risky." As a result of the reduced credit limits, consumers ended up with higher debt ratios and many consumers' credit scores dropped.

In May of 2009, President Obama signed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act.

Here is a summary of some of the main changes expected in the credit card industry.

Notice requirements

Creditors are required to give 45 days' notice regarding any significant changes to the terms of a credit card agreement. Previously, only 15 days' notice was necessary.

If borrowers do not agree with upcoming changes, they have a right to cancel the account. The creditor can increase the minimum monthly payment, but they cannot require the borrower to pay the balance in full.

Creditors are also required to provide statements at least 21 days before the payment due date. This is one week longer than what was previously expected.

Disclosures of credit card agreements must also be improved. This includes posting the agreement on the creditor's website.

Interest rates and fees

Interest rates cannot be raised on existing balances for one year after the account is opened. After that, the new, higher rate is limited strictly to new transactions. Teaser rates must be fixed for at least a six month period.

Some borrowers have multiple interest rates being applied to different portions of their credit card account. When borrowers pay more than the minimum payment, the additional funds must be applied to the highest interest rate's balance.

Creditors can no longer charge a fee to borrowers for going over the credit limit.

Protecting younger consumers

In an effort to better protect young and impressionable college students, borrowers under 21 cannot obtain credit cards on their own. Younger borrowers will need to submit a written application with the signature of a co-signer who is over the age of 21.

Ideally, this new provision will reduce the number of college students who graduate with huge credit cards bills racked up over the four year college experience. It will enable these students to graduate in a better financial position so that more of their income can go to saving and investing rather than to debt reduction.

The changes outlined in the CARD Act will help protect consumers against unethical practices. However, these changes alone will not be enough. Borrowers must become more informed credit card users to better guard against falling victim to their creditors.


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Ozeme J. Bonnette is a financial coach, speaker, and author of Get What Belongs to You: A Christian Guide to Managing Your Finances. After working for a top financial services company, she shifted her focus to speaking to groups hoping to increase financial literacy. She earned 3 Bachelor's degrees at Fresno State, and her MBA at UCLA's Anderson School. Her blog is http://www.povertynorriches.com. Reach her at ozeme@thechristianmoneycoach.com.