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An overview of the CARD Act

Credit card users throughout America may not have realized it, but for the last few years a law passed by the United States Congress in 2009 has been providing them with significant protection. That law is known as the CARD Act, and it became effective on February 22, 2010.

The CARD Act still isn't widely known as significant legislation, but the protections it provides to credit card users are significant indeed. First of all, the law implemented some changes as to when and why credit card companies can increase the interest rate on a card. One protection is that the consumer must miss two monthly payments in a row before interest rates can be hiked. The other is that information about any increase in an interest rate that will be applied going forward must be provided to the consumer 45 days before it goes into effect.

The CARD Act also limits late fees. For starters, a monthly payment needs to be set for one particular day each month and cannot be changed by the company, and consumers have until 5:00 p.m. on that date to get the payment in to be considered on time. Also, late fees have to be reasonable, and cannot be any amount that is higher than the minimum payment due.

One specific change that is a result of the CARD Act is probably the most visible one - a change that anyone with credit card debt likely appreciates. As is now required by the law, credit card companies must make it clear on each monthly statement exactly how long it will take the debtor to repay what is owed if they only make the minimum payment due. The credit card statement must also include what it will cost a consumer in interest paid if that is the case.

Source: Consumer Financial Protection Bureau, "CARD Act factsheet," accessed on Sept. 13, 2014

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