5 Most Important Takeaways from the New CARD Act Legislation

Most Important Takeaways from CARD ActIn the last year, the credit card industry has undergone an overhaul and all consumers need to be acutely aware of how these changes will affect them the most.  

Managing your revolving credit accounts in 2011 is different in many ways as a result of the new legislation and in order to stay on top of these changes, consumers need to understand the most important aspects of credit card reform.

Here are 5 of the most important takeaways from the new CARD act legislation for consumers and some key tips for managing your accounts more effectively in 2011:

Tip #1:  Open Your Mail

Consumers are notorious for tossing aside unopened mail from card issuers.  Under the new laws, card issuers must send a one-page summary of the agreement held between them and their customers. The one page summary should clearly outline the important components of each contract. In the past, the mumbo-jumbo fine print was ignored by too many consumers who agreed to terms that were difficult for them to decipher.  Now, the Federal Reserve wants to ensure all consumers really understand what they are obligated to do under the agreements and have a solid basis for understanding how their credit card works.  Be sure to open all correspondence from your credit card provider, no matter how solicitous the envelope might appear.  Make a point of filing your card agreement summary away in case you need to refer to it down the road.  Any updated notices or statements specific to your agreement, you need to read, take action if necessary, and then file away accordingly.

Tip #2:  Keep Tabs on Timelines

The CARD Act has implemented a new notice policy for card issuers who are making changes to consumer accounts. Now, not all changes that will be made will require card issuers to notify their customers about. Those changes that do require notification from the issuers, like the card providers planning to increase the minimum payments on cards, must be made in writing with 45 days advanced notice. This is a great reason you need to follow Tip #1. If you delay or avoid learning about the impending changes, it gives you less time to react accordingly, if you can at all. There are some changes to accounts that do not have to be announced such as the closing of an account or a reduction in credit limit. Bottom line, it’s vital to keep tabs not only on your account but also on the notifiable changes from the issuer.

Tip #3:  Keep Cards Active

Inactive cards are often thought to be a frugal spending reduction strategy but the reality is that these days card providers will usually take a stance on inactive consumer accounts in one of two ways. If you do not regularly use your card, the provider will either cut your credit limit or they will close your account entirely (happened to me, thank you very much Chase). Card issuers are no longer legally allowed to charge fees on inactive accounts but if your account gets closed abruptly, it can be detrimental to your credit score, especially if the account is an older account that you’ve had for years with a large credit limit.  It’s a more effective strategy to keep those cards active with an auto utility bill payment, or some other similarly mandatory expense item, to keep that account active so as not to effect your credit score in a detrimental way.

Tip #4:  No Kids Allowed

Legislation has taken to task the problem of under-aged children running up large revolving debt balances. These days, no one under the age of 21 can apply for a credit card on their own unless they are able to show verifiable proof of sufficient income.  Alternatively, parents or guardians must co-sign for the card or add them as an additional cardholder to their existing account. This means college-bound kids leaving home will no longer be allowed to apply for a card of their own accord. They must maintain an account with their parents until the age of 21. It’s important to note that credit card offers may not be solicited to those under the age of 21. However, prepaid cards are gaining popularity with teens who do not always understand the rules and exbortinant fees and expenses of a pre-paid cards. While new rules were established to prevent under-aged debt bombs, card issuers are already working their way around the legislation with new products.

Tip #5:  Pay Your Bill On Time, Every Time

This is certainly not a new rule but making on-time regular monthly payments is the most important rule of thumb for credit card users, but now it’s more important than ever. The only way to help boost your credit score and maintain a solid credit foundation is to be consistent, disciplined and regimented about making payments. Card issuers are now required to simplify their billing statements so consumers can truly understand the impact of finance charges, bringing revolving debt expense to the forefront in consumers’ minds. There are now fewer excuses for consumers to say they ‘didn’t know’ or ‘didn’t understand’ their statements and the impact that revolving debt can have on their financial well-being.

Being proactive about maintaining your accounts is essential and far more important since the new legislation was enacted.   Underwriting guidelines and standards for creditors is far more strict so obtaining credit is no longer a walk in the park.  How you regularly handle your accounts speaks volumes about your creditworthiness, especially in the eyes of other lenders, insurance companies, landlords, and even potential future employers.

So, pay attention to each and every statement you get from your card issuer and don’t miss any payments.  Easy enough, right? 

Get ‘er done…

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