Westchester attorney explains credit card changes for the new year

The holidays are over but I can almost guarantee that most of us are still paying for them; afterall, this is America where we buy now and pay later. For many of us, we are lured into spending with offers from credit card companies of low initial interest rates, which expire upon the earlier of a specified date or your failure to make a timely payment. Well, not anymore.

The new year brings many changes and this year credit card customers are receiving a small bonus. The Credit Card Accountability, Responsibility and Disclosure Act (or Credit CARD Act) of 2009 includes the most sweeping changes in how credit cards are marketed, advertised and managed in decades and was signed by President Obama back in May. While some of the changes went into effect over the summer, more important changes take place beginning February 22, 2010.

So, how will this all effect you?

1. Late payments – banks can no longer penalize you by taking away your low interest rate because you fail to make a timely payment. If you are paying a low 1.9% interest (set to expire on a date certain) then they must honor that rate even if you make a late payment. They can still charge you a late fee but they CANNOT raise your rate simply for being late.

2. Interest rate hike – banks must give 45 days notice of any hikes and such increases cannot be applied to existing balances.

3. Several rates on one card – if your card is carrying several different balances each with a different interest rate, your monthly payment must be applied to the portion with the highest interest rate first.

4. Over-limit charges – many companies previously charged fees if a cardholder exceeded their credit limit. Now banks must allow customers to opt out of such a practice, meaning that if you opt out, such charges over your limit will be declined and you cannot be charged a fee.

5. Restrictions on cards issued to students under the age of 21 – gone is the bait of free t-shirts and pizza for any college kid to sign up for a card. Now students under age 21 must get a parent to co-sign the application or provide evidence that they have enough income to pay their own monthly bill.

Since banks and credit companies are now restricted, somewhat, as to their billing and interest rate practices, rest assured they will likely come up with clever ways to impose new fees.  Just keep an eye on your monthly statements.