A new credit card regulation aimed at protecting consumers from “unfair” and “deceptive” practices used by issuing companies came into effect Monday.
President Barack Obama’s Credit Card Accountability, Responsibility and Disclosure Act (CARD Act) will have more effect on youngsters than other age groups.
The Act protects gullible youths by controlling the marketing of unsolicited credit card offers. In fact, marketing of credit cards within 1,000 feet of a college campus is banned.
Colleges, universities and alumni associations will have to reveal the existence and details of contracts they sign with credit card marketers allowing access to student and alumni contact information.
The best news probably is that issuing companies cannot raise interest rates for 12 months when you open a new account, unless you have a variable rate card, are more than 60 days late in paying your bill, or work out a special agreement with your card company and then fail to live up to it.
The new law also bans companies from issuing cards to people under 21-years-old, unless they have an adult to co-sign.
Another highlight is that credit card companies must now give you 45 days notice before they can increase your interest rate, start charging you new fees, or make other big changes, unless you have a variable rate card.
Card companies, however, have already found other ways to increase their revenue. Annual fees, disappeared during the last 10 years ago, for instance, have made a comeback. Companies have also created new fees and raised old ones. These include a one-dollar processing fee for paper statements for cards issued by stores. Another example is a $19 inactivity fee if a card is not used for six months.
Other banks increased existing fees like transferring balance from one card to another. Some companies are also raising interest rates. The average rate offered for a new card climbed to 13.6 percent last week, from 10.7 percent during the same week a year ago.