New credit card rules kick in today giving consumers more protection against hidden fees, sudden rate hikes and predatory lending.
The Credit Card Accountability Responsibility and Disclosure Act (CARD Act) is the most sweeping reform in credit card history.
Highlights, as reported by SmartMoney.com, include:
-- No rate increases for the first 12 months after opening an account
-- Rate increases can only be applied to new charges.
-- Annual and application fees cannot exceed 25% of your initial credit line
-- No more double-cycle billing
-- A six-month minimum promotional-rate period
-- No more over-limit fees, unless the card holder opts in
-- Must give 45-day notice of pending rate or fee hikes or any other significant changes to credit-card terms
--No credit cards for college students unless co-signed by a parent or they can demonstrate "ability to pay."
As Aaron and Henry discuss in the accompanying clip this is a small step in the right direction of financial reform, but by no means a huge victory for consumers.
The credit card industry is already devising ways to skirt the rules and minimize the impact on their bottom line. Some banks have already found a way around the rate-hike issue, by raising rates and then using refunds to pay off some of that rate after the customer pays on time. Of course, if the payment is late the credit card company is there to impose the exorbitant rates of old.
There are also unintended consequences. Cardholders with top credit scores can expect to garner more attention. BusinessWeek says these customers will receive more reward points and deals for their card issuers -- along with higher annual fees.
Meanwhile, there's still no major reform of Wall Street or a Consumer Financial Protection Agency, leading Henry and Aaron to conclude the CARD Act is, at worst, a minor setback for banks, who are still winning the war.
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"We are what we repeatedly do. Excellence, therefore, is not an act, but a habit." - Aristotle
