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Credit card users will begin to see new protections and rights starting tomorrow as a series of new rules from the Credit CARD Act begin to take effect.
Beginning tomorrow, all banks and lenders must begin sending bills out at least 21 days before the due date.
Also, 45 days’ notice must now be given before a significant change can be made to a customer’s fees or rates.
These new time frames are a large improvement over today’s requirements: bills are mailed out at least 14 days before a due date and notices are send merely 15 days before a change takes place.
In addition, beginning tomorrow banks will need to inform consumers before raising rates due to a missed payment or going over the credit limit on a credit account.
As great as these changes are to the credit card industry, most of the changes from the bill aren’t set to take effect until February 2010 and others still won’t be seen until August 2010.
Here’s what you can expect in February:
- Consumers will be allowed to avoid interest rate increases in the future and be given the chance to pay off outstanding balances on their credit cards at the original rates. This is a major change for the thousands of people that find the balances on their closed accounts suddenly subject to rising interest rates, leaving them unable to pay the balance they owe. Once this provision takes effect the only way your existing balance rate will increase is if you become 60 or more days past due.
- Credit card companies will not be able to raise your rate simply because you made a late payment on an unrelated credit card. This has been known as the Universal Default provision for years and it’s been protested for a long time.
- Rates also won’t increase in the first year the credit card is issued and all promotional terms must last at least 6 months.
- Another important feature that we’ll see in late February 2010 means that a company accepting a payment by credit card will need the customer’s permission to go over their credit limit and only one over the limit fee will be allowed per billing cycle.
- Payment allocations will be made more fair. Any payments over the minimum due each month will be applied to the debt with the highest interest rate.
- Double-cycle billing will be banned.
- Cards will no longer be issued to anyone under 21 without parental consent and proof of income.
- Fees can no longer be assessed for payments made by phone or online.
If you’re interested in a more detailed look at what the changes are and when the new credit card provisions will take effect, here’s a helpful PDF.