Credit Card Practices Unaffected by the New Law

When the CARD Act goes into effect in February, credit cardholders will see relief from many of the practices that have strained budgets and even sent thousands into default and bankruptcy.

Credit card issuers will no longer be allowed to use "universal default" to raise your interest rate on one card if you're late on another. They'll be prevented from raising the interest rate on current balances unless you're 60 days late in payments. They'll be required to give 45 days notice before they can raise the rate on future charges or make any other significant changes to your account.

But some practices will remain unaffected by the CARD Act.

For instance, credit card issuers will still be allowed to reduce your credit limit arbitrarily. Further, unless they've used credit data to make the decision, they don't even have to notify you until after the fact.

The one thing they won't be allowed to do is reduce your rate to an extent that triggers an over-limit fee. Otherwise, they can do as they please.

According to a study undertaken by FICO, 24 million consumers were subject to credit line decreases in the period from October 2008 through April 2009. Another study that covered April 2008 through October 2008 showed 22 million cardholders as having credit limits reduced.

This means that in the year from April 2008 to April 2009, 44 million credit cardholders were affected by credit line decreases. That's about 23% of the total population for whom credit report files are kept.

They can also close your account without notice. Credit card issuers don't like to carry accounts that aren't making them any money, so if you've let your account go inactive or if you're one of the "deadbeats" who pays your bill in full and on time each time it arrives, they could decide to simply close the account. And they don't have to tell you they're doing it!

They do have to notify you if the decision was the result of reviewing your credit report, but they do not have to tell you before they do it.

Having a credit card turned down at the checkout counter is embarrassing, to say the least. Thus, consumers who plan to use a credit card on a shopping trip should stop by their computers before they leave the house. Why? They should check in on their credit card to make sure they still have an available balance - and that the dollar amount of that balance hasn't changed.


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