In May 22nd of 2009, the Credit CARD Act was signed into law. The intent of the law was to protect credit card users from massive interest rate hikes that apply to the money a user already owed on the card and providing increasing the time to make bill payments. As a result of the law, credit cards now operate under these rules.
- Ability to Opt Out – A user who disagrees with the new terms and conditions a credit card company issues out may elect instead to close their account under the old terms. A minimum of 5 years is granted to completely pay off the remaining balance.
- Rules for those Under 21 – A credit card company cannot issue a credit card to anyone under the age of twenty one without an adult co-signing the agreement or the applicant providing proof of income sufficient enough to pay off accrued debt. The act also prohibits direct targeting young adults with university promotional events.
- Limits on Interest Rate Changes – Massive increases to interest rates are only allowed when introductory periods end or when a cardholder is late on their payment. Whenever interest rates are going to be increased, a minimum of 45 days notice must be provided to the customer. While companies can still provide variable rate cards and increase your rates after being late for 60 days on making a payment, they must return rates if you successfully make payments for six months consecutively.
- Higher Interest Debts First – Whenever you make a payment on your credit card account, companies must apply that payment to the highest interest debts first.
- Restrict Low Balance Cards – Some companies were previously creating cards that had a low balance and could be sold to people with bad credit. These cards exploited those customers by hitting them with proportionally large fees. Those, as well as gift cards and prepaid cards, have been largely restricted.
- Increased Time to Pay Bills – A minimum of 21 days must be provided to the customer from the time a credit card bill is mailed.