Discover Your Blueprint

I was reading one of my favorite financial sites on Saturday evening and I came across this really good article that breaks down the new Credit Card Accountability Responsibility and Disclosure Act (CARD) that is due to start on February 22nd. Most credit card users should have already received their disclosures about the change in procedures in the past few weeks and while the CARD Act has it’s naysayers, I think overall it’s good legislation to help people who can’t help themselves. I must issue this disclaimer before I continue, I am against using credit, I have not used credit cards since October 2008 while taking Dave Ramsey’s Financial Peace University program. We believe in using cash for everything. Now that I gave you my personal stance, let’s get down to business.

Here are some of the highlights of the CARD Act for the consumers:

Finance Charges, Interest-Rate Hikes and Notifications

• No rate increases for the first 12 months after opening an account.
• Rate increases can only be applied to new charges.
• Annual and application fees cannot exceed 25% of your initial credit line.
• No more double-cycle billing.
• A six-month minimum promotional-rate period.
• No more over-limit fees, unless the card holder opts in.
• No fees to make credit-card payments online or over the phone, unless you make a payment on your due date.
• Must give 45-day notice of pending rate or fee hikes or any other significant changes to credit-card terms.

Billing Statements, Payments and Disclosures

• Billing statements must be sent 21 days before the due date.
• Your due date should be the same date each month.
• Payments are considered on time when received by 5 p.m. on the due date or the next business day after a holiday or weekend.
• Payments above the minimum must be applied to the highest-rate balance first.
• Each monthly statement must include information on how long it would take you to pay off your balance if you make minimum payments only and the total you’ll pay, including interest and principal; and how much you need to pay each month in order to pay off your balance in 36 months and the total you’ll pay, including interest and principal.
• Statements must also include a warning that by making only minimum payments you will pay more interest and it will take you longer to pay off your debt, as well as a toll-free number to call if you want to be referred to a credit-counseling service.

College Students and Young Adults

• No credit cards for college students unless co-signed by a parent or they can demonstrate “ability to pay.”
• No credit-limit increases if you are under 21 and have a co-signer without that co-signer’s permission.
• No credit-card marketing and freebies on college campuses.

As with everything, there are loopholes with this new CARD Act and you should read your disclosures or read this article. What I do like is that college students can no longer be suckered into signing up for a new credit card with t-shirts and toys because credit card companies are not allowed to market on campus and students must have a co-signer or show the ability to pay for the credit card. As I mentioned before I am opposed to using credit cards because personal finance is not taught at any level of education in this country and I believe these credit card companies have preyed on the financially uneducated for decades. True financial independence will come when people learn that cash is still king.

Sources: The bulleted information is from Smart Money and Aleksandra Todorova