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How does the Credit CARD Act benefit you?

Credit cards are a way of life in Connecticut and all other states. Your bank or credit union constantly encourages you to apply for their credit card. The stores at which you shop do likewise. Often you receive unsolicited “pre-approved” credit card applications in the mail.

While it is tempting to avail yourself of all these credit opportunities, you may wish to practice self-limitation. The problem with credit cards is that the amount of debt you accumulate tends to become the amount of credit you have. Many people who file bankruptcy do so because of their overwhelming consumer credit card debt that they now find they cannot pay.

The Credit Card Accountability, Responsibility and Disclosure Act gives you significant protections against unethical practices that some credit card companies engaged in prior to the Act’s passage in 2009. As explains, the Credit CARD Act protects you in many ways, including these four.

1. Rate hike limitations

The credit card company can only hike your interest rate under certain circumstances, such as when a promotional rate ends or if and when you make a late payment. The company must give you 45 days’ notice of any other rate hike.

2. Opt-out choice

If the credit card company seeks to make significant changes to the terms of your account, it must give you the option to accept or reject those changes. Be aware, however, that if you choose to opt out, you likely will have to close your account and pay it off in full within a minimum of five years.

3. Payment due dates

The credit card company must give you at least 21 days after you receive your statement to make your monthly payment. In addition, your payment date must be the same each month and the cut-off time must be no earlier than 5 p.m. Should your payment date fall on a holiday, weekend, or any day on which the company is closed for business, your payment is not due until the date on which the company reopens for business.

4. Over-limit fees

Credit card companies have the right to charge you a penalty if you go over your credit limit. However, you must opt into this practice. If you do, the amount of your penalty cannot exceed the amount by which you went over your credit limit. If you opt out of this practice, your credit card company will simply decline any purchase you attempt to make that exceeds your credit limit.

This is general information only and not intended to provide legal advice.

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