The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, which took effect Feb. 22, 2010, regulates how and when credit card companies can charge interest and increase interest rates. The law bans unfair rate increases and protects consumers from deceptive lending practices.
First Year Interest
The interest on a credit card must remain the same for the first 12 months the account is open. Credit cards with variable rates tied to an index or those with introductory rates are excluded from this regulation. Rates may also go up if the account is 60 days or more past due or if payments for a payment arrangement are not made as promised.
Introductory Rates
Introductory rates offered by credit card companies must be in effect for at least six months.
Rate Increase Notifications
Banks are required to notify credit card account holders of rate increases 45 days before the increase takes effect. Credit card customers have the right to opt out of the increase. This may result in the company closing the account and requiring a higher minimum payment.
Fair Interest
Rate increases can only apply to new charges made after the increase takes effect. Excess payments will be applied to the highest interest balance first. Double-cycle billing, in which the previous month's balance was used to calculate the interest for the current month, is also banned.
Retroactive Rate Increases
The CARD Act bans retroactive rate increases at any time, for any reason or for universal default. Retroactive rate increases for late payments are strictly regulated.
Deferred-Interest Balances
On deferred-interest balances, credit card companies are required to apply the full payment made to the remaining deferred-interest balance for the two billing cycles before the deferred period expires.
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