Credit Card Holders’ Bill of Rights Act of 2009

The new Credit Card Holders’ Bill of Rights Act of 2009 isn’t even set to take effect until the second quarter of 2010, but while the new act has been widely praised, many people aren’t sure what the changes really mean at a personal level.

• Credit card payments will go toward the highest interest debts first (for example, cash advances often have the highest interest rate), the current method is the opposite of this.

• Introductory rates are going to be for a one year minimum and after that 45 days notice of hikes are required.

• Credit card statements must be mailed by companies at least 21 days before the due date.

• Double-billing cycles are no longer permitted.
• Companies must provide greater disclosure. Consumers will now be advised how long it will take to pay off a debt making only monthly minimum payments, and what the full interest cost of such would be.

The news is not all good though. Interest rates overall are likely to be higher, as companies will want to take preventive action since they can’t simply adjust rates as soon as they want. Also, low-rate introductory offers are likely to be much harder to come by for the same reason.

Card issuers, who have said the changes could cost them as much as ten billion dollars, may more often implement annual fees and other charges to make up for lost revenue that previously came in the form of late or over-limit fees. At present, only 20 percent of card issuers have annual fees, but experts think that number is likely to go up.  

Another move likely to be considered by card issuers is to simply cut back on the amount of credit available entirely. A good credit rating will be no guarantee of easy access to credit, as has been the case in the past. Companies will be acting to preserve their capital and therefore less money will be flowing out to consumers.

“Credit is going to be more expensive and harder to get,” says the Director of Education for CCOA, Mark Foster. “Now, more than ever, it is important for consumers to focus on knocking down their credit card debt and building up their savings.”