The first phase of the Credit Card Accountability Responsibility and Disclosure Act (aka Credit Card Act) goes into effect February 22, 2010. The new law will require certain disclosures to all credit card consumers. The following disclosures must be present on every monthly statement sent to credit card borrowers:
- The total number of months it will take for the consumer to pay off their credit card if they only make the minimum payment. This disclosure is very important because many debtors are under the false belief that paying only the minimum payment on their credit card will pay off the card in a few years. That is far from the truth. Depending on the balance of the credit card it could take 10 years or more to pay off a credit card paying only the minimum payment.
- The total cost of the credit card loan. This cost will include the principal and interest if the consumer only makes the minimum payment as noted above. This disclosure is necessary to let people know that they will often pay twice or even three or four times for an item they charge to their credit card and repay over the years.
- The payment amount the borrower needs to make if they want to pay off their credit card loan in 36 months. This disclosure will definitely help millions of Americans come to terms with their credit card debt. When debtors begin to realize that they need to pay $1,000 per month over the course of three years to pay off their maxed out credit cards they may seriously consider bankruptcy if they don't have the income.