Sweeping Consumer Reforms Take Effect February 22

--Credit card users can benefit from new ways to save

The majority of long-awaited consumer protections outlined under the “Credit Card Accountability Responsibility and Disclosure Act of 2009,” the Credit CARD Act, take effect February 22, 2010. The CARD Act is the most significant consumer credit legislation since Congress passed the Truth in Lending Act (TILA) in 1968. The Act does, in fact, revise the original TILA, making it more robust.

“You can only benefit if you know your rights and how to make them actionable,” says credit counselor Bruce McClary of our Consumer Credit Counseling Service (CCCS). He shares six tips for saving made possible by the CARD Act:

1) Inform your creditors that you would like a fixed credit limit.
Credit card users will be given the option of choosing a fixed credit limit that cannot be exceeded (resulting in an over-the-limit fee or default under the credit agreement). When opting out of the over-the-limit service, if you try to charge something over your limit, it will simply be declined. The average overlimit fee is $32—opting out could prevent you from incurring needless fees.

2) If you miss a due date, catch up within 60 days to avoid penalty interest rates.
In the past, as soon as you paid late on a credit card even once, you could be stuck with your penalty interest rates for good. Now you can avoid penalty interest rates altogether by bringing your delinquent accounts current before they become 60 days past due.

3) If you are more than 60 days late, you still have a shot at redemption and a lower rate.
Even if you have missed more than two payments, and are now coping with a higher “penalty” interest rate, you still have a chance to undo the damage. If you bring the account current and pay on time for the first six months after the interest rate increase, credit card companies will restore your old interest rate.

4) If a creditor notifies you it is raising your interest rate, consider closing the account.
Creditors will be required to give their users a 45-day advance notice before the rate increase takes effect, except in circumstances where the increase is the result of being more than 60 days past-due. If you don’t wish to pay the new rate, or deem the new payments will be unmanageable, consider closing the account and shopping elsewhere for lower rates.

5) Comparison shop.
Creditors will post the complete terms of their credit card agreements on the Internet. This will allow potential account holders conveniently compare their options online.

6) Read the box.
A box in your credit card statement will now include how much you’ve paid in interest and fees in the past year, what monthly payment would allow you to pay off the outstanding balance in 36 months, and how to access credit counseling. Use this information to motivate yourself and, if you need it, to seek budgeting and credit help.

McClary stresses, “As always, make sure to read all future correspondence from your lenders for notification of proposed rate increases and other important disclosures.”

Our non-profit Consumer Credit Counseling Service is member of the National Foundation for Credit Counseling (NFCC) and a system-wide accredited business with the Council of Better Business Bureaus. Call (888) 656-CCCS or visit us online to begin a free credit counseling session.