“The Credit Card Accountability Responsibility and Disclosure Act of 2009 or Credit CARD Act of 2009 is a federal law passed by the United States Congress and signed by President Barack Obama on May 22, 2009”.                         Source:  Wikipedia

The CARD Act is approved to protect card holders from the unfair practices, sudden hikes in interest rates and changes in terms and conditions usually done by credit card companies. Following is the extract summary of the bill:

  • Credit card holders must be given protection against sudden hike in interest rates. A minimum 45 days notice must be provided to all card holders for any changes in interest rate so that they don’t feel cheated.
  • Regular payers must not be penalized by credit card companies. If a customer is regularly paying all his/ her bills on time for six months continuously, they must be charged their previous interest rate and not the hiked rate.
  • Credit card holders must be informed 21 days before the due date of their bill payments to avoid penalties.
  • Credit card companies usually mention some confusing terms such as ‘fixed rate’ and ‘prime rate’ as it is misleading for credit card holders. It is important that they set proper definitions of those terms.
  • The CARD act also gives the right to card holders to set a credit limit for their card. This will avoid over-spending and thus credit card companies will not be able to charge for non-payment.
  • Fair allotment of payments must be done by the credit card companies. The debts which have a higher interest rate must be cleared off first and then other bills.
  • The act also limits the amount of ‘over-the-limit’ fees that are usually highly charged by credit card companies to gain profit.
  • Vulnerable consumers will be protected from fee-heavy subprime credit cards.
  • Under this act, congress must collect the data on industry profits of credit card industry and present every year.
  • The credit card holders will have the right to get an explanation of the minimum amount he/she has to pay against the debts and interest charges.
  • A credit card cannot be issued to teenagers i.e. below 21 years or if issued they must present a co-signer who can give a guarantee to repay the debts.
  • Banks must provide a reason for participating on college campuses and at university-themed events.

Under the CARD act people will get a chance to improve/ raise their credit score. The rules under this act automatically helps card holders to pay timely as they will be more aware of their limits, interest rates, etc and they can avoid paying penalties resulting in improvement in credit score. A high credit score in itself has many benefits for availing loans. Thus, you can get a loan at a lower interest rate as you would have paid off all your debts on time.

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