Credit CARD Act of 2009

On May 22nd, President Obama signed the Credit Card Accountability, Responsibility and Disclosure (Credit CARD) Act of 2009, a move that provides stronger protection to current and future credit card holders.

This well-timed reform brings forth the most sweeping changes the credit card industry has seen in 40 years. But, how does it affect you and your family?

According to the Fact Sheet provided by the White House on the CARD Act: "Americans need a healthy flow of credit in our economy, but for too long, credit card contracts and practices have been unfairly and deceptively complicated, often leading consumers to pay more than they reasonably expect. With this law, consumers will have the strong and reliable protection they deserve."

The following is a breakdown of the changes and how they will impact you.

Protects Against Unfair Rate Increases

Currently, credit card companies can raise your rate instantly if you make a late payment. Under the Credit CARD Act, a card's interest rate can no longer be raised unless the account is 60 days late. The increased rate will have to be restored to the previous level if the cardholder pays on time for six months. Additionally, your card's interest rate cannot be increased within the 12 months after you open the card.

Enforces Fair Interest Calculation

Credit card companies will be required to apply excess payments to the highest interest balance first, as consumers expect them to.

Limits Fees on Gift and Stored Value Cards

Gift cards are now required to remain active for at least five years from the date of activation. Further, credit card companies will not be able to charge inactivity fees unless the card has been inactive for at least 12 months (a fee which must be clearly disclosed to the buyer).

Ends Late Fee Traps

Institutions will have to give cardholders a reasonable time to pay the monthly bill – at least 21 calendar days from the time of mailing. This act also ends late fee traps such as weekend deadlines, due dates that change each month, and deadlines that fall in the middle of the day.

Ensures Advance Notice of Term Changes

Under the Act, card issuers must provide at least 45 days advance notice to the account holder of any changes, including a change in the interest rate or rewards structure. Currently, card issuers are required to give just 15 days advance notice of any changes.

Protects Young Adults

Credit card companies can no longer solicit credit card to anyone under the age of 21. Further, card issuers cannot provide credit to anyone under the age of 21 unless they have an adult co-signer or show proof that they have the means to repay the debt.

The majority of the provisions will go into effect in February 2010, with a few starting this August and the remaining going into effect August 2010.

For more information on Connexus' credit card offerings, visit http://www.connexuscu.org/card-services or call 800-845-5025.