New credit card rules: What you need to know about the changes

New restrictions that will require banks and credit card companies to be clearer about their policies take effect next week. The rules apply to rate hikes, billing practices and hidden fees.
In May, Congress passed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, which is meant to protect consumers from predatory practices by banks and credit card companies.
These new rules that go into full effect Feb. 22 are supposed to make it easier for consumers to understand these terms better and have more time to pay their monthly bills.
A rule that already went into effect in August requires banks and credit card companies to send a notice 45 days before making any significant changes on certain fees.
“Credit cards companies are trying to make the most with the time that they have and unfortunately there is a few months lapse before this Feb. 22 provision went into effect and they are absolutely taking consumers to task,” said Maria Audas of the S.C. Consumer Affairs Department in Columbia.
“Consumers are going to want to be especially careful after Feb. 22 of any notices coming in the mail that may say, ‘hey do you want to agree to the over the limit programs or fees?’ Make sure you know what you’re agreeing to or signing.”
Audas said consumers must make sure not to throw away inserts that may look like junk mail. For example, over-the-limit fees account for close to a third of the credit card industry’s income, so these rules are going to be a huge hit for them. That means banks will fill your mailbox with these notices that may confuse a consumer and try to get card holders on board with them immediately.
“Once you get that written notice, you make the decision, ‘OK, do I accept this interest rate increase or do I close out my account?’” Audas said. “Now if you close out the account, you still have to pay the balance and there might be a slight effect to your credit score just for closing out the account. But then again, you won’t have to deal with the interest rate.”
With these new rules next week, credit card issuers will be banned from offering credit cards to those under 21 unless they have adult co-signers on the accounts or can show proof they have enough income to repay the card debt.
”I feel like the rules and regulations will definitely clarify things for people who don’t exactly understand what is on their credit statement,” said Taylor Anthony, a senior at Coastal Carolina University. “I know that with a lot of college students, they don’t exactly know what they are reading or what they are understanding, so maybe it’s a great way for them to understand it better.”
Anthony said he’s never had to deal with credit card debt since he pays his balance off every month.
“I have the ‘go paperless’ option, so it’s all online, so I haven’t seen any of those notices from my bank,” he said. “I would definitely say that on a everyday mailing basis when I grab the mail, I see an offer from a credit card company extending me an offer to apply, to have a credit card with them. Typically it’s like Capital One, Master Card or Chase Bank will send me one, and I don’t even bank with them.”
Anthony said he’s noticed credit companies coming to his campus and setting up shop in places like the cafeteria. He said some representatives will have their Personal Digital Assistants with them and will get students to sign up for a credit card online just to get rewarded by a free pizza.
“I feel like little scams like that can drag people into a hole, because they really don’t know what they are getting into and then eventually they forget to cancel their card and kinda hurts them from there,” Anthony said.
The new rules will force credit card companies and banks to explain their applications, statements and other notices about the credit card in plain language such as using clear wording and readable type, rather than the traditional fine print to explain the terms.
These companies also won’t be allowed to charge an over-the-limit fee with out letting the consumer know in advance and offering the option to stay with the policy or opt out.
“They have to get the consumer’s express written consent,” Audas said. “If they don’t get the consumer’s consent, they cannot charge them. You can say no, they cannot charge you if you say no. Now obviously with that there’s going to be the inability if you go over the limit to continue purchases. Your card will not be accepted.”
Anthony said he thinks ignorance leads most college students into credit card trouble.
“I think their upbringing has a lot to do with it, where parents either are sheltering them or spoiling them where they don’t have to worry about these kinds of things. I fortunately was not either of the two,” he said. “Once I got my own credit card, I learned the ins and outs of it myself. I have a better understanding of how the system works because I got dropped into it early.”