Changes to the Credit Card Industry – Credit CARD Act of 2009

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Credit Card Act of 2009
The Obama Administration really pressed for some major changes to the credit card industry, and it was about time. I understand the credit card companies are in the business of making money, but many of their business practices are unethical at best and borderline illegal at worst. OK, maybe they aren’t illegal, but that is…

The Obama Administration really pressed for some major changes to the credit card industry, and it was about time. I understand the credit card companies are in the business of making money, but many of their business practices are unethical at best and borderline illegal at worst. OK, maybe they aren’t illegal, but that is only because they invent new methods of charging their customers that haven’t been covered by the law books.

Don’t get me wrong, I’m not against using credit cards. I use them and recommend using them – as long as they are paid off in full each month. The benefits of using credit cards are well documented, and when used properly, they are not harmful. The problem with credit cards are when customers carry a balance, or when card companies assess late fees unfairly.

Below I have listed the details of what the Credit CARD Act of 2009 Entailed:

Credit CARD Act of 2009 – Phase 1:

Credit Card Act of 2009The first phase of the Credit CARD Act, which went into effect on August 22, 2009, required credit card companies to give a 45-day advance notice to cardholders before making any significant changes to the account holder’s terms and conditions or interest rates.

The 45-day advance notice applied to increases in interest rates, certain fee changes (annual fees, cash advance fees, and late fees), or make other significant changes to the terms of your card.

The 45-day notice for rate increases does not apply to variable interest rates, expiring introductory rates, rates that are tied to an index, or when the card holder breaks previously agreed to terms (such as a payment plan).

It also required credit card companies to mail statements no later than 21 days before the due date (the previous requirement was 14 days).

Credit CARD Act of 2009 – Phase 2:

The second phase went into action on Feb 22, 2010. Here are some of the ways the second phase of the Credit CARD Act affected consumers and credit card users:

Interest Rate Increases:

  • Credit card issuers cannot increase interest rates within the first 12 months of the account being opened (unless consumer makes late payments).
  • Introductory promotional rates must remain in effect for at least 6 months (great news for people who take advantage of 0% Balance Transfers).
  • Credit card issuers will not be able to raise an interest rate on an existing balance unless the cardholder goes 60 days past due on the account.
  • Increased interest rates only apply to new charges and cannot be made retroactively.
  • No universal default clauses.

Credit Card Fee Restrictions:

  • Over Limit Fees. Card holders must give consent to allow card issuers to process over the limit transactions. Even with consent, only one over limit fee is allowed per billing cycle.
  • Payment Processing Fees. Credit card issuers will no longer be allowed to charge payment processing fees for accepting payments via mail, phone, or online, but will be allowed to charge fees for expedited payment processing.
  • Payment Due Date. Payments will not be considered late if they are received by 5pm on the due date, including weekends and holidays; payments made at a local branch or office must be credited the same day. (credit card companies could previously set the time payments must be received, often making the cutoff in the morning of the due date to increase the number of late payments and the fees they could charge).
  • Annual Fee and Non-Penalty Fee Limits. Non-penalty fees cannot exceed more than 25% of the credit limit when the account is opened. For example, many secured credit cards currently come with annual fees almost as high as the credit limit.

Student Credit Cards:

  • Consumers between the ages of 18-21 will need to provide proof of income or have a co-signer before they can be approved for a student credit card.

Billing and Payment Allocation:

  • Payments must automatically be applied to the highest interest balance first. This is great for consumers who open a new credit card for a favorable interest rate, such as a 0% Balance Transfer card.
  • Credit card statements need to include a minimum payment disclosure that details how long it will take to pay off the current balance and how much interest will be paid over the life of the loan. These numbers must be given for both minimum payments and the payment need to pay the card off in 3 years.
  • Double-cycle billing will no longer be permitted (double-cycle billing calculates the average monthly balance over two months).
  • Credit card issuers must make account terms and cardholder agreements available online.

Credit CARD Act of 2009 – Phase 3:

The third phase of the Credit CARD Act went into effect on August 22, 2010 and had provisions for reinstating lower interest rates if card holders continue to make on time payments for 6 months, and there were new rules for gift cards, limiting the fees and prohibiting the expiration of them for the first 5 years.

Things that Didn’t Change About the Credit Card Industry:

  • Interest rates were not capped
  • This did not prevent credit card companies from inventing new ways to add charges or bill customers

Here is a copy of the Credit CARD Act of 2009 (Engrossed Amendment as Agreed to by Senate).

The Responsibility Belongs to the Credit Card User

I think these changes are great. The credit card companies have too much control over fees and rates, and the system is overly complicated. Standardization in the industry has helped consumers better understand the system, and ultimately helped the industry save money in other areas, such as customer support and billing.

But ultimately, the responsibility falls on the user. Card holders sign the credit card agreement and should know and understand the contents, even if it is a 63-Page Credit Card Agreement. The key to successfully using credit cards is to pay the balance in full every month, on time, every time.

New Credit Card Statements

Perhaps the most visible change brought about by the Credit CARD Act is the new statements. Credit card companies are now required to inform cardholders how long it will take them to pay off their bill when making minimum payments and what their payment will need to be in order to pay off their loan within 3 years (and how much money they will save in interest if they pay off their card in 3 years). This is an example of the new American Express credit card statement.

Credit Card Companies Respond

One of the big fears many people had about the Credit CARD Act was that there would be negative reactions in the industry and that many credit card companies would drastically reduce the amount of credit they offered, make it too difficult for people to obtain credit cards, or hike interest rates. There were some credit card companies that raised interest rates before the new laws took effect, which prompted Congress to implement some Credit Card Act changes earlier than anticipated.

However, it seems that most companies have responded well to the Credit CARD Act changes and have made it a goal to educate their consumers about the new changes. Almost every major credit card company clearly labels the new rules on their website and some even show graphics regarding how to read the new statements required by the Credit CARD Act.

The Citi website has a list of new changes and explains how the new rules will affect cardholders. The Citi site clearly states how to read the new credit card statements, standardized information about payment due dates, and information about how and when your payment is applied to your balance

What To Do If Your Credit Card Company Changes Your Terms

If your credit card company makes a change to your terms, you have the option to accept or decline the changes. However, if you decline the new offer, the credit card company will then close your credit card and you will no longer be able to make new charges with it. You will also still owe them the remaining balance on your card, at the same terms you had when the account was closed.

Closing credit cards can affect your credit score. You need to be careful about closing credit cards though, because it can possibly cause a decrease in your credit score because it lowers your average age of credit as well as your available credit – two important factors in determining your FICO credit score.

If you are trying to keep your credit score up, then you may find it is better to accept the new terms and either deal with the higher interest rates or apply for a 0% balance transfer credit card to move your credit card balance to a new card with no interest.

What are Your Thoughts on the Credit CARD Act?

Overall, I think these changes helped clean up the industry and make it easier for consumers to know where they stand. Which benefit those people who carry a balance on their credit cards, and will likely end up hurting people who like to take advantage of rewards credit cards. Even though I am in the latter category, I support most of these changes.

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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    These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

  1. Kristen says

    Since I work in a field that helps people who are in debt, I can’t begin to say how helpful I think these changes will be. That being said, there is still a huge amount of personal responsibility that comes with having a credit card. I hope the general public realizes that they are ulitmately responsible for how they use their cards. The new rules will at least add some consistency to certain practices and make terms and conditions more easily accessible, which is very important.

  2. Hal says

    I do like some of the bill. Though I do think credit card companies have been predatory in going after college students. But the thing is that they are just taking advantage of the bigger problem which is the lack of teaching fiscal responsibility. We’ve changed the way we consume and turned our nation into a nation built upon fostering debt.

    If we could get back to a time where people could purchase without the need of credit we’d be in good shape. Though I don’t know if we ever will. Particularly when you have a government bent upon borrowing and creating money out of thin air.

    • Ryan says

      Hal, Unfortunately, financial topics are not on the curriculum of most high schools. For the most part I think this is a move in the right direction, but I agree, the lack of financial education is a big problem in our country.

  3. Craig says

    They spoke a lot about this on Bill Maher show last Friday if you watch and how it seems that CC companies do anything possible to trick users and profit off their lack of education, awareness, insecurities or whatever. This may help in certain aspects, but overall do you really think things will change that much? Like you mention it doesn’t say CC companies can stop thinking of different ways to make money or charge, which means they will find some loop holes. Also, changes still don’t prevent lack of responsibility on users part. To me at least, that seems to be a bigger issue than anything else.

    • Ryan says

      Craig, you’re right, these changes cannot prevent the lack of responsibility on the user’s part, which is ultimately where responsibility lies. People need to know how much they can afford to spend and not go beyond that.

      But these changes will help standardize the industry and eliminate some of the areas where credit card companies are taking advantage of people – things like universal default, arbitrary cutoffs on due dates, late fees when the payment is received the day after a Sunday or holiday, sending out bills less than two weeks before the payment is due, charging for payments online or over the phone, etc. The credit card companies can always create new fees and expenses, which very well might happen. But I think this is a move in the right direction.

  4. Craig says

    @Ryan It seems the only people who really don’t get any benefit from this are the “deadbeats” the users who pay in full every month. Do you think they should be rewarded more somehow as a way to incentivize?

    • Ryan says

      Craig, I think the users who pay every month are already getting a fair deal – usually with reward points or cash back, and the ease of making transactions through one source and having a single payment and tracking capability. The rewards are already in place. I think the bigger issue is to keep people from being taken advantage of.

  5. John Hunter says

    Good post. I agree, credit cards are good (though some people use them poorly). We need regulation though because the issuers of the most credit cards are using very egregious practices.

  6. Kirk Kinder says

    I am a huge fan of transparency, but I don’t like the government getting involved in this for a few reasons:

    1. It is just another example of us shunning personal responsibility and letting the government “save” us. If you don’t like 60 page credit card agreements with fine print, then don’t use them. If customers walked, then the industry would change.
    2. Unintended consequences. This will cause the companies to find new fees in other ways. More than likely, it will hit those folks who pay the balance each month. Annual fees, disappearing rewards programs, or shorter (or no) grace periods will become standard. Also, the folks who are irresponsible with their usage of the credit cards will find lower credit limits and higher interest rates from the get-go. It will pull credit out of the system. Just wait – two years from now the government will be back at the credit card companies charging them with not making credit as readily available as it once was.
    3. As mentioned above, the responsible card owners will end up subsidizing those who are fiscally challenged. This is not right…period.
    4. I hear how this will protect college students. You really have to wonder if college does much for students. Maybe degrees are over-rated. They are spending upwards of $40,000 for a college education (at a state school), but they can’t figure out that eventually they have to pay for that pizza they just bought with a credit card. Ignorance isn’t an excuse. This isn’t a hard concept to grasp, especially for someone at an institute of higher learning. I hate to be rude, but maybe you shouldn’t spend $40,000 on a college degree for someone who can’t figure out that the pizza and beers aren’t free when you put them on plastic. Besides, if you are treated as an adult in the eyes of the law, then you shouldn’t have to get Mommy or Daddy to co-sign for you. College is there to teach life lessons. Either they learn quickly to use credit wisely, or they come out of college and learn the lesson the hard way. Plus, do we think that a college student will graduate and suddenly use credit wisely. Do they shed their ignorance at 22. I find most people really get into trouble with credit once they have good paying jobs where they can get a great deal of credit.
    5. The government is just pandering for votes. They figure if they can say they got tough with the banks regarding credit cards, we will forget they gave the banks billions. Or, that they authorized the bonsues at AIG.

    Hate to be so cynical, but this is really a ridiculous waste of time and money. If they really want to make a difference, then teach personal finance in the schools.

  7. DDFD at DivorcedDadFrugalDad says

    If people would all pull together and pay off their balances by the end of the month many CC companies would go out of business . . . or raise their fees dramatically. They rely on human nature to strive and thrive . . .

  8. Kristen says

    I, too, agree with some of Kirk’s points. I also agree, Ryan, with your overall assessment. I think you said a mouthful with, “But the credit card industry thrives on confusion, changing rates and agreements without warning, and charging usurious fees.”

    There are plenty of loopholes currently that negatively affect good consumers. There are loopholes that punish everyone like “if we don’t receive your payment by noon on the due date, you’re late even if we get it at 2 p.m.” or “your payment was due on Sunday, but we didn’t open Saturday’s mail until Monday, so you’re late.” Then a $39 fee follows.

    I can’t agree more that high school students need more financial education, and college students need more financial education, too. I’m not sure I agree with Kirk’s philosophy of letting them learn the hard way because those mistakes can ripple down and effect everyone. We’re seeing it now.

    • Ryan says

      Kristen, Financial education is paramount, but unfortunately, it is not taught very often to high school students. I still don’t know why it isn’t.

      As for the late fees – the current system can be very unfair to the customers.

  9. Miranda says

    Overall, I think that the act is going to be fairly beneficial. It is mostly aimed at credit card practices that penalize even the responsible users of credit. While personal responsibility is important, the credit card companies should also have the responsibility to play fair. I do disagree with the under 21 part, though. If you are legally able to enter into a contract, you should be able to…legally enter into a contract.

    My real concern is the timetable for implementation. I am worried that between now and February credit card companies will rush to do what they can to use the current rules to their full extent, slashing rewards and jacking up interest rates.

    • Ryan says

      Miranda, I’m sure there will be some negative aspects of the bill that occur before implementation. For example, I wouldn’t be surprised to see a string of interest rate hikes before the change. It will hurt some customers, but overall, I think the environment will be improved.

  10. Olivia @Independent Beginnings says

    While I can understand the frustration of the age limit, I also understand why they are doing it. Too many college students in the past have used credit cards very irresponsibly. They even pay tuition with them! I think the hope with this act is that college students WILL get credit cards with their parents as cosigners. Then, if the parents notice their child doing something foolish, they can step in and teach their child how to use the card responsibly. Of course, this only works if the parents are educated about credit cards themselves and care about their child’s financial well-being. If the parent does not care or is uneducated about credit cards, then having the parent as a cosigner won’t affect the student one way or the other. So, I can see where they are coming from.

    • Ryan says

      Olivia, I am not sure if I would ever cosign a credit card for my child. It doesn’t teach the child responsibility or how to handle money, and the risk is high because you cannot control it. A better option would be to give the child a repaid credit card or a debit card. That can’t ruin the parent’s credit.

      I understand why the government thinks this is a good idea, but I don’t agree with it. If someone is old enough to enter into a legally binding contract, they should be able to get a credit card.

  11. Dan says

    I disagree with the proposal to eliminate fees for paying online or by phone. Depending on how the company is set up, alternative methods of payment might incur additional costs – it should be the right of the company to transfer that cost to the customer. No, I don’t like those fees, and sometimes that extra cost is not truly justified. But it’s no place for the government to restrict a company’s right to enact it. (C.C. companies are not the only entities that do it: airlines, banks, entertainment ticketing agencies, etc.)

    • Ryan says

      Dan: After putting more thought into it, I agree with you. I was thinking from a consumer perspective, and that isn’t the right way to think. It is more convenient for everyone involved, but it should not be driven by law.

  12. Hal says

    The more I think about this the more I think in the end the result will be bad and agree with Kirk on a lot of points.

    I do think there is a need to make sure that companies don’t level burdensome usury charges, but that is in the end what I think our government will be doing in the form of taxes to pay for all the bailouts.

    Seeing the stock market today I also think that many on Wall Street or digesting what this bill means for banking and are getting real skidish.

  13. Kirk Kinder says

    Great post Ryan. I do agree that the credit card industry is not consumer friendly, and you do a great job of pointing out how they aren’t. And, my post was done late in the evening so it was more of a vent than an educational post. I appreciate you pulling out the nuggets for a discussion.

    I still fear that this will have unintended consequences for all involved. I believe this is true of any government interjection into the markets, and it will be especially true here.

    The transparency and orderly rules will be fantastic, but the end result – costs to the consumer – will not be reduced because of it. Those who are irresponsible with credit will end up with higher rates from the start, which will cost them as much, if not more, than the fees or increasing rates. Second, these folks will get even smaller credit limits. I read a good piece how this may result in more low income folks utilizing check cashing services. Talk about high fees.

    For prudent credit card users, they will pay through annual fees, shorter grace periods, or other charges. And, as mentioned, it will subsidize those who don’t use credit wisely.

    More than the fees, I fear this just reinforces our lack of personal responsibility. People will think the government is helping them out, which ultimately it probably won’t as the total costs will remain the same or credit will be harder to attain, but they will think they were helped. Then, as other issues pop up, we will look to the government to fix instead of taking control ourselves.

    A part of me also wonders if this will help those drowning in debt. Is it the confusing agreements, lack of standardization, or penalties and fees that are hurting consumers, or is it there behavior? I know the fees hurt. I think just about everyone has had a late payment fee at one point in their life. But, I seriously doubt that this is what is keeping folks tied down. It certainly doesn’t help, but I think their poor financial management is to blame.

    And, as hard as it is for me to say this, we need to remember that the credit card companies are loaning us money with no recourse. If we default, they get nothing. With defaults steadily climbing, these companies face some serious losses. If someone gives us money with no way to force a payment, we should have to face stiff punishments for failing to pay promptly.

    Again, Ryan does a great job of explaining the pros to the act, and I am all for transparency and consistency, but this will be another act that will bite us in the end. I don’t know exactly how yet, but I can see the potential very easily.

    • Ryan says

      Kirk: I am a fairly strong believer in the government staying out of the markets. Watching the housing market bubble and bank bailouts has been difficult for me. There are many people getting insanely wealthy and companies being rewarded for unethical and sometimes illegal behavior.

      Will this end people abusing credit cards? Of course not. People will always abuse them. But standardizing rules takes away a big excuse and makes things clearer for everyone involved – including the credit card companies.

      Will this decrease credit limits? Probably. but is that really a bad thing? I understand the need to spend money to maintain economic growth, but the reason the real estate bubble happened was too much easy credit. And many people who are not financially savvy treat their credit cards as easy credit. People with a $30,000/year income do not need a $30,000 line of credit on their credit cards.

      No recourse for bad loans? Then credit card companies shouldn’t be so quick to approve everyone that applies for a credit card and extend their line of credit after the borrower makes 2 or 3 payments on time. If the credit card companies were really interested in having the loans paid back on time and in full, they would be more strict about approving cards. For credit card companies it is strictly a numbers game. They know their demographics and how many cards they need to approve and at what rates and credit limits to achieve profitability. The ideal credit card customer does not pay their bill on time, but maintains a perpetual balance.

      I highly recommend reading this excellent NY Times article: What Does Your Credit-Card Company Know About You?

      I will reiterate my earlier sentiments: Ultimate responsibility lies on the card holder, and I don’t think credit cards or credit card companies are evil. But I do think there needs to have more standards within the industry.

  14. Kristy says

    I see both sides of the coin, and while I’m a big advocate of personal responsibility, I believe some aspects of this Act are needed. The confusing terms, ambiguous terminology, fees causing more fees, double cycle billing…all these things culminate into a festering wound that has become our credit crisis. Yes, there are those people who abused their credit and are in the position they’re in because of their actions. But, there are also perfectly good account holders who got screwed by credit card companies malevolent practices. So, while I understand this is going to cause credit card companies to respond in less than favorable ways, I think having clearly defined regulations for an industry that has long since taken advantage of consumers is long overdue.

  15. Becca Nunya says

    I actually work for one of the banks that will be affected by this change. I used to feel the same way every consumer feels about banks and fees until I started working here. Its not because I love the company….it’s because I realize how irresponsible some consumers are about the logistics of agreeing to use their credit card. Here are my following thoughts:

    #1-Consumers are not taught financial responsibility (unless they grow up with accountants as parents). When I tell someone a fee or condition of their account is in their Terms and Disclosures that they agreed to when they filled out the application their response is “No one really reads any of that stuff”. That statement completely baffles me…if you dont read it how d0 you know what you’re actually signing?? You might be signing away your house. There are so many options out there for people to become knowledgable about stipulations and conditions about credit, finance, loans, credit cards…PLEASE people use google!!! lol

    #2-Fees are associated to credit cards for REASONS! If they didnt have late fees, everyone would be late on their payments. If they didnt have overlimit fees, everyone would use their card in excess to their credit line and there would be no reason for credit limits all together. There is a processing fee that most banks have to pay when you pay over the phone from another financial institution. Thats why banks give other options to make payments (i.e. mail, at a bank, or online). If you dont like the $10 fee…use a $0.44 stamp or pay $29.99 for internet service (or get a library card)

    #3- Most interest rates are increased based on Risk Level. If you go from owing $1,000 to $12,000 in 6 mos you are more likely to default on your responsibilities based on financial statistics. Im not saying all people do…some people have different situations like opening up a business or got a commission at work and can pay it off but MOST DONT FALL INTO THAT CATEGORY. Based on the current economic situation everyone is having a hard time and banks understand that. If you arent able to make your payments and you ask for a lower rate but all they can offer you is a reduced payment for twelve months but no lower rate if you say thats not going to make a difference YOURE WRONG. Yes you may be still accruing interest at that rate but instead of making life decisions at the grocery store or gas station you know that despite you still having the same interest rate you are able to feed your family. It might take you a longer time frame to pay off the balance but at least you wont affect your credit report and still have the opportunity to continue with a good payment history.

    #4-Please start reading information and passing it on. Educate your children…teach them responsibility and accountability with money. You dont have to be a Business Major to know this stuff. I know Business and Accounting Majors who are in more credit card debt than anyone else I know. Please people….start taking responsibility for your own actions. If you are late, dont lie and say I tried to call and you were closed or go online and it wouldnt let me pay (we can now track this stuff 🙂 Just say you messed up and forgot or didnt have the money. WE LOVE HONESTY!!!

    #5-Set Your Emotions Aside: If you are calling your bank…most times you wont get the same person you talked to before. The person on the line has no idea about the situation and is trying to help you (well most of us 🙂 We understand people get upset about their money because alot of people are strapped right now. Being nice is the best way to get stuff done. Cursing, yelling, and calling people names or incompetent is a guaranteed way to get the least amount of service on your account. The nicer you are the more out of your way people are willing to go. Remember we are humans too, just because we work for a company youre mad at or because your day was JACKED up does not give you the right to yell at us.

    In closing( i know this was long) lol Credit Card companies are a business they have to make money. If you dont like a particular company…trust me there are others out there. Take your business somewhere else. But be aware that they have Terms and Conditions with their credit cards. And make sure you read the DANG AGREEMENTS!!! lol

    Love yall

    • Ryan says

      Becca: Thanks for sharing your perspective and the perspective of the companies, very well stated. The only thing I can add is regarding the over the limit fees. Once upon a time credit card companies simply wouldn’t allow charges to be made if it would take the card holder over their limit. Now some companies not only allow it, but welcome it. The new legislation allows card holders to turn that feature off and not be allowed to make charges over the limit. I think it’s great.

      There are a few other changes to the legislation I think are good, such as standardized billing requirements and a few other things. I think simplification is better.

      Thanks for sharing.

    • Heather Johnson says

      Since you work for a bank as you say and support this, please tell me why my credit union has sent me a letter stating that this bill affects my car loan? I have 2 cars financed with them over the last 2 years and I pay them bi weekly, so i have a car payment taken out every week to pay for them both. Now they are saying that due to this credit card act they can no longer offer bi-weekly deductions (it come straight out of my bank account with them) because they won’t be able to bill me 21 days in advance in a statement. The problem is they don’t send me a statement, never have in 2 years! so now they want to make $1200 a month in car payments due on the same day every month and I get to pay $100 extra a month that i was saving by paying twice a month. My arguement with them is that I don’t get a statement to begin with! Please let me know how this is part of the credit card act.

      • Ryan says

        Heather, It might affect all loans, I’m not sure. You should still be able to pay twice per month regardless of whether they send you a statement. Just set up your auto bill pay to continue making the bi weekly payments. They should continue to credit your account as they have in the past.

        • Ari says

          It can affect a car loan if the loan is written as what is called open-ended lending. This mainly affects credit unions (I work at one), as banks normally don’t do open-ended lending. The card act was supposed to only affect credit cards but because of the wording that was put in at last minute(without any input from the industry) it affects all open-ended loans which means auto loans, personal loans, lines of credit, etc. This does not affect mortgages or home-equity loans. Basically the loan mandates that the statement has to be delivered and be sent out 21 days in advance of the billing period, so weekly or bi-weekly is not possible because there is no way to be in compliance. This is the one part of the law that I and my coworkers agree is bad- everything else will mostly benefit consumers. I agree that Ryan’s suggestion to set up auto-pay to make your normal payments is the best bet, and that is what we are going to be recommending our members do.

  16. Nav says


    I came across this blog skimming google results to figure out how credit card companies will turn a profit in lieu of the Credit Card Act of 2009. The sudden interest came about after being hit with an overlimit fee. I’ve been a responsible card holder over 3 years. I never actually wanted a credit card until realizing the difficulty of renting an apartment, receiving low premiums on insurance, etc. in California. Frankly it’s quite upsetting because I earn a considerable amount of income and have never been in debt.

    Last week I had a lapse in financial responsibility and went over the credit limit. I only noticed days later when card transactions were successively declined. Then bam, hit with a $40 charge. Now I’ve never had official training using credit cards and knowing the ins and outs. All the good practices I learnt from my father, so this overlimit fee was news to me. I thought a credit limit was just that, a limit that you couldn’t go over. I managed to get the fee reversed after days on the phone with the card company. What upset me was their stubbornness to remove the fee, but their outrageous lies. Every agent and their manager said I couldn’t opt for hard limits. It took second hand advice from a close friend and a threat to cancel my card to actually change my account to reflect hard limits.

    This experience has lead me to believe that the Government doesn’t want to condone irresponsible behaviour but protect consumers from the vile practices of credit card companies. It’s not the over-limit charge that I want protection from, but from the card companies not advertising the fact that you can opt-out. In my opinion, it’s the card companies that are being irresponsible.

    Just my 2c.

  17. Linda says

    Despite risking sounding repetitive, I agree 100% with Ryan and Kristen: financial basics should be taught in the classroom. This will greatly cut down on debt trouble later on in life.

    On another note, I do support the passing of the Credit CARD Act especially in the context of standardizing payments and notifications. The credit card industry has gotten to the point where it needs to be seriously rebuilt from the ground up. In the meantime — luckily for us! — there is a growing number of sites out (off the top of my head, is a great example) there that aim to guide people through the intricacies of credit card plans; IMO, it’s better to have computers wade through the tedious fine print and zillions of options rather than me. The combination of these free online resources and an overall increase in personal financial responsibility might just be the tipping point for improving the economic sense of America.

  18. Heather Johnson says

    Hi Ryan,
    Thanks for the info. Are you saying we can set up the auto bill pay with our bank and just keep paying bi-monthly so that by the end of the month (when they have our due date on the 28th) it will be paid in full for that month? I didn’t know we could do that and our credit union certainly didn’t suggest it either. at least that would keep our budget the same. I’ve never had anyone change a car loan mid-way through like this. The credit card act may be a good thing for some of the things it is doing but this part of it is really messed up when it affects all your other loans. Thanks again for the response.

    • Ryan says

      Heather, I can’t speak for your specific loan because I don’t know the details… But you should be able to set up your payments on auto pay, and so long as you pay enough to cover the payment each month by the due date, you should be fine. The payment should be applied the day it is received, so it should result in less interest being paid over the long run (because the first payment is applied before a full month’s interest is earned). This is a great way to reduce your debt more quickly.

  19. pat says

    I know over limit fees are not something any one wants. but now you have the option of opting out and not getting the fee due to the transaction will be denied. but what is going to be denied if you are close to your credit limit. Are you not going to be able to put gas in your car at a prepaid pump so you can get all the way to work due to the credit card company’s new responsibility to deny you from going over the limit. most gas pumps work on the simple principle of if you have something available you can fill you tank. well I f you have $20 available and you fill your truck with $60 how is the card company to deny you for something you already did? I don’t think card company’s should allow you to charge over the limit but you should be responsible in some fashion if you do something the card company is not able to prevent you from going over the limit. I myself have found myself in a bad mood and went on a shopping spree to cheer up. spending lots of money in a very short time in one day. oops, spent more then I had available due to a fast food place didn’t charge my balance till midnight. am I correct in understanding that this is the consumers fault not the credit card company’s. any over limit fee is a penalty for not controlling your finance. banks can charge you for every returned check; the merchant can charge you. one returned check can easily coast you $50 if both charge you. why can you not be held responsible for budgeting you credit card balance?

  20. Nav says

    @pat – So opt-in. Credit cards are designed with limits in mind. If the industry doesn’t conform to the general principal that limits are involved, then it needs reform. If the gas pump doesn’t check to see if you have available credit, then it shouldn’t authorize charge and allow you to pump gas. If merchants are using old equipment that doesn’t authorize transactions immediately by phone or over the Internet, they need to upgrade to modern POS technology. This is not only to protect the consumer and merchant, but also prevent fraudulent activities.

    Now, if you want to be allowed to go over the limit, simply opt-in. Card companies deem transactions over the limit as a convenience. If cardholders want the convenience, they’ll opt-in. If they don’t, then they’ll suffer. However those that haven’t heard of such a scheme, expect credit cards to have a hard limit, and their expectations should be met from the onset of receiving their credit card. Still, that’s no excuse for merchants not to upgrade to modern technology to do real-time authorization and transactions. This is important to the security of the industry otherwise the merchant is at risk of protecting stored credit card information on their end, which can lead to identity theft of the cardholder or fraudulent activity against the merchant. However it’s their risk & responsibility, not the credit card company, and certainly not the consumer.

    I might misunderstand your frustration, but I don’t drive so I rarely interface with gas pumps. I just think gas stations should rethink their design if it’s flawed or based around assumption that cardholders have the convenience of going over the limit.

    But think of it this way: as a consumer shopping in a department store, you find an expensive suit (think $100s) representing a huge discount of 95%. You buy it. Are you responsible for mistake by the department store after the transaction?

    The over-limit fee isn’t going to protect merchants from dishonest or consumers that bring risk, nor do they expect consumers to be autonomous. That’s why merchant’s buy insurance :).

  21. John Hunter says

    I think the changes in the laws are good. Credit card companies have behaved in abusive ways and regulation is appropriate when companies are behaving in such ways. The behavior of credit card companies has required the government to take legislative action to protect citizens from abusive practices. Large contributions to politicians by the credit card companies bought enough politicians votes to delay sensible laws for years but finally the abuses grew to large for the payments to politicians to buy enough votes to allow continued abuse.

  22. Evan says

    This stuff is so frustrating. There is no way Visa, MC, AMEX, and Discover are going to just roll over take this. They didn’t on Phase 1 and won’t now. It is like group life insurance, which helps those in bad physical shape but is a bad deal for those in good financial shape. This is going to help those in bad financial shape at the direct expense of those in good financial shape.

    • Ryan says

      for the most part,yes. But the competition for new customers will always remain strong, so those in good financial shape should still be able to get decent rewards cards.

  23. fredct says

    I’m not sure what you mean by ‘not rolling over and taking it’. Its the law. Will they find other ways to make money? Sure, but this prevents some of the most deceptive, underhanded, and unfair practices. Its about time is my opinion.

    As someone is good financial shape, it’d be willing to lose a couple perks in exchange for the greater good – preventing people from being screwed quite as badly. However, I really don’t expect that to be the case. As Ryan pointed out, those in good shape remain in a strong position – you owe nothing to the card company and can jump ship at a moment’s notice… so the companies still need to offer you good products.

    Contrary to (sometimes) popular belief, card companies make plenty of money off of financially strong customers (through merchant fees). If you make $1K in purchases a month between your cards, the credit card companies are turning around ~$30 in revenue off of you per month, or $36o per year. All with very very little chance of you not paying it back. It’s worth their while to keep your business.

    I’ve no doubt there will be a few companies who will try to eliminate rewards programs or insert annual fees, and they will not be rewarded for trying. Their business will just go elsewhere.

  24. Evan says

    “I’m not sure what you mean by ‘not rolling over and taking it’. Its the law. Will they find other ways to make money? Sure, but this prevents some of the most deceptive, underhanded, and unfair practices. Its about time is my opinion”
    – What I meant is exactly what you answered in the following sentence. If they are losing $XX Million from one type of eliminated fee/interest hike…it will show up somewhere else. That ‘somewhere else’ is yet to be seen.

    “Their business will just go elsewhere”
    – Only until it becomes the industry norm

    • fredct says

      They could, but I’d much rather see them make their $XX dollars a year in a straight forward and understandable way. If they want to make back their revenue, do it in a way that everyone knows whats going on. If they do it in more sneaky, underhanded, and dirty ways then we should outlaw those too.

      >> Only until it becomes the industry norm
      Then the business will *still* go elsewhere – i.e. out of the industry. What you miss about financially strong customers is that if they’re not given a reason to use the cards, they won’t use them. Oh sure, they may keep one or two cards around for emergencies, but the industry will lose out on tons of usage and the associated revenue.

      Unlike people in debt, the good customers can simply say adios, cut up the cards, and use debit cards, checks, and cash.

      If it becomes the industry norm, the industry will be gone (here ‘the industry’ refers to cards being used as every day payment rather than as a tool for debt) and they’ll quickly figure out it wasn’t worth it.

  25. Kristen says

    I’ve been asked frequently about the possible negative implications of the CARD Act, such as lower credit limits and higher fees. It’s still a little early to know exactly what impact the new regulations will have, though there does seem to be anectodal evidence that the credit card issuers are imposing more fees.

    However, in regards to reduced credit limits and making it more difficult to get credit, that has been going on for awhile, long before these new regulations came into play. I think that has less to do with the new laws and more to do with the overall financial crisis. More and more people have been defaulting on their credit card payments. And a lot of consumers were given large credit limits which they probably should never have had to begin with. (I will cop to being one of those people several years ago, so I know from first-hand experience.)

    I think the credit pendulum has been swinging back and forth to extremes for awhile. Hopefully it will eventually reach a center point where those who are credit-worthy and those who are not are each given the appropriate amount of credit, fees and interest rates accordingly.

    • Ryan says

      I think we are seeing some pendulations within the Credit Card industry, which is understandable given the recent credit crisis. The good Credit Card offers seem to be coming back though, which means there is health and competition for new customers. Hopefully consumers a lenders have learned from the last few years and will both sides will show some restraint.

  26. Bill says

    Actually this is a good deal for consumers, regardless of economic standings, because these Credit Card companies are making serious financial gains, or profits from a very large percentage of people. Only the well off, or above average income can usually find the best deals, or a solution to there financial challenges, including Bankruptcy. But the below average income American, or even many average blue collar workers are caught in the Credit Card use. With false promises, or bonuses and slowly get caught in over there heads, so this is a good deal, and helps us all with large corporations, companies and greedy Credit Cards. Anyway, good luck everyone, and God Bless.

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