The new CARD Act as been in effect for the past few months, but there is still a lot of confusion surrounding the new rules. Below we offer some clarity on a few of the rules.
Rule: Credit card consumers must be given 45 days notice before their interest rate is increased.
Clarity: Sometimes you may see the new rate applied to credit card charges made 14 days after the debtor received notification of the new interest rate. For example, if you received a notice that your interest rate would increase in 45 days and two weeks later you made a $200 purchase, the new interest rate would apply to the $200 purchase if it was not paid off before the 45 day window had expired. This rule was implemented to prevent credit card consumers from charging up a lot of things right before the interest rate changes.
Rule: There are no rules governing the amount of penalty fees credit card companies can charge - not yet.
Clarity: The Federal Reserve proposed capping penalty fees to the dollar amount of the violation. For example, if a debtor was $100 dollars over their credit limit, then they would not be charged a penalty fee that was more than $100. However, this new law has not been implemented yet. It is expected that the new rule will be passed and implemented by August 2010.
Rule: Credit card companies can't raise the minimum payment requirements on existing balances to more than double the previous rate.
Clarity: Credit card companies can raise the rate to more than double the previous rate if anything lower would prevent the debtor from paying off their balance in five years. Also, there is no limit to how often a bank can raise the minimum payment requirement, as long as they give 45 days' notice.