Because of the many poor business practices that led to the U.S. economic collapse, new laws were created and put into place in an effort to protect citizens, especially in the area of credit cards.  The new Credit CARD (Card Accountability, Responsibility and Disclosure) Act that was signed into law in May of 2009 put forth several guidelines and restrictions for credit card companies.  Because the bill is quite involved and full of legalese, you may be left wondering “how does it actually impact me”?

To help give you a better understanding of this new act and how it affects you, let’s begin by taking a look at some of the most common questions.

Q:  Why is the Credit CARD Act Necessary?

A:  The Credit CARD Act was designed as a safe guard against predatory lending practices that creditors often impose on consumers.  Because creditors were implementing drastic changes on short, or no notice, leaving no way for consumers to respond, this act was put into place.  Creditor can no longer make these changes without giving consumers the option of declining the modifications.

Interest rates cannot be increased for no reason any longer, and if the rates are to increase, consumers must be given 45 days notice.  At this time they can opt to agree to the changes, or decline the changes and close the account.  This was put forth in an effort to help cardholders break free from their creditors and not be forced into a financial situation they cannot afford; breaking the debt trap cycle forever.

Q:  How Does The New Law Protect Me?

A:  As previously stated, credit card companies must provide consumers with written notice of any changes to their accounts at least forty-five days before the new terms go into effect.  This gives consumers ample time to look into the changes, verify the rates, and decide how the changes to the terms will affect their overall situation.  If the card holder does not like the terms, he or she can opt out, close the account, and switch to a more affordable option with another company.

Credit card holders will also have the option to take part in credit repair courses that teach them more about how to manage credit and improve their financial situation.  These courses are free of charge and provide practical guidelines to help the average citizen repair his or her bad credit along with tips for rebuilding their credit score.

The new Credit CARD act also implemented rules for creditors regarding the mailing of statements.  Creditors must now allow cardholders to have at least twenty-one days to pay their bill, without being hassled or called by the company.  Cardholders must have their due date remain the same each month, unless it falls on a holiday, or a weekend.  If this occurs, the due date will move to the next business day without any worry of additional fees.

As you can see, this new law has made major strides in protecting the American consumer against unfair business practices of financial institutions.  While you must still use your credit cards responsibly, you now have a bit more coverage from being unfairly saddled with terms you cannot afford.