Mar09
Your Rights under the CARD Act if you Carry a Balance
Many of us carry a balance on our credit cards from month to month; in fact, statistics show that about 46 percent of all American families roll their balances over each month. If you’re one of those individuals, consider yourself lucky to be protected under the CARD act currently in place by Congress.
In fact, some of the provisions of these new credit card laws could very well be speaking directly to you, particularly if you find yourself carrying over your balances from month to month.
Here’s how the new CARD act may affect you and your credit card balances:
- Rate Freeze on New Accounts – The new legislation states that creditors must not change a cardholder’s interest rate during the first year of opening the account. That’s great news for the many cardholders who found credit card companies raising the interest rates on their credit card mere months into their new account. However, there are some exceptions to this rule: expiration of a promotional rate; variable APRs; or payments that fall 60 days past due. The creditors, in these three circumstances, have the legal right to change your credit card’s interest rate.
- Reward for Responsible Behavior – If you find yourself on the receiving end of a rate increase because you fell at least 60 days behind on your credit card payment, you may still be in luck. Although the credit card company has the legal right to raise your interest rate due to nonpayment, they must reinstate your original credit card interest rate if you make all required payments during a six-month period.
- Protection on Existing Balances – Although credit card companies are permitted to increase your card’s interest rate after a year of opening a new account, they are not permitted to apply the new, higher interest rate to your current balance. Only those purchases made after the rate hike can fall under the new interest rate.
- Payments to Higher Interest Rate Balances First – If you have a credit card that has different interest rate for different purchases, the credit card company must apply all of your payment (beyond the minimum payment) to your balance with the highest interest rate first, thereby enabling you to save big on finance charges.