Credit Card Rules

Consumer Affairs BranchFairfax County Department ofCable and Consumer Services

fairfaxcounty.gov/consumer

The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 provides consumer protections for credit cardholders.

Read your agreement, especially the fine print, to understand your rights, penalties, transaction fees, and to avoid unnecessary surprises.

Card Member Agreement

Contract that spells out the terms and conditions of using a credit card

Credit card issuers must post credit card agreements on their websites plus submit to the Federal Reserve System for posting at: www.federalreserve.gov/creditcardagreement

Credit Member Agreement

Your credit card company must send you a notice 45 days before they can:◦ Increase your interest rate◦ Change certain fees that apply to your account

Annual fees Cash advance fees Late fees

Make other significant changes to the terms of your card such as increase your minimum payment

Increase in Rate or Other Fees

Your credit card company doesn’t have to send a 45 day advance notice if:◦ You have a variable interest rate tied to an index.

If the index goes up, notice is not required before your rate goes up

◦ Your introductory rate expires and reverts to the “go-to” rate

◦ If you are in a workout agreement, your rate will increase if you don’t make your payments as agreed

Increase in Rate or Other Fees

Your credit card company cannot increase your rate for the first 12 months after you open an account. There are some exceptions:◦ If your card has a variable interest rate tied to an

index, you rate can go up whenever the index goes up

◦ If there is an introductory rate, it must be in place for at least 6 months. After that, your rate can revert to the “go-to” rate that was disclosed when you got the card

Interest Rate Increases

◦ If you are more than 60 days late in paying your bill, your rate can go up

◦ If you are in workout agreement If your credit card company raises your

interest rate after the first year, the new rate will apply only to new charges you make

If you have a balance, your old interest will apply to that balance

Interest Rate Increases

Cardholders must be given the right to cancel or opt-out if they don’t accept the changes

When you opt-out, your account will be closed and you may have up to 5 years to pay off the balance

Interest Rate Increases

fairfaxcounty.gov/consumer

Odessa heard that credit card companies could no longer make sudden changes to consumer accounts. When her bank reduced her credit limit in half, she protested that it was a violation of the new credit card rules because the bank did not provide advance notice of the credit reduction.

◦ Does the bank have to reverse the reduction and her prior credit limit?

Can They Do That?

Advance notice is not required if:◦ The credit card cuts your credit limit◦ Closes your account◦ Makes changes to variable and promotional

interest rates Notice would be required if the reduction in

the credit limit triggered an over-limit fee or penalty rate

Credit Limit

You have the right to opt out or reject certain significant changes in terms on your accounts

Opting out means the cardholders agree to close their account before fee increases take effect

You may have up to 5 years to pay the balance under the old terms

The Right to Opt Out

Late Payment Warning

Minimum Payment Warning

Credit Card Repayment Calculator

Cardholders cannot be charged over-limit fees unless they give permission or opt-in to the card issuer to approve transactions that exceed their credit limits

If you opt-out, a transaction that would take you over your limit, may be turned down

If you do not opt-in and your credit card company allows a charge to go through, it cannot charge you an over-the-limit fee

Over-the-Limit Transactions

If you opt-in, your credit card company can charge only one over-the-limit fee per billing cycle

You can opt-in at any time If you don’t have enough credit available on

your card, do you really want to give the card company permission to charge you a fee to cover a purchase if you don’t have enough credit available?

Over-the-Limit Transactions

If your credit card company requires you to pay fees (such as an annual fee or application fee), those fees cannot total more than 25% of the initial credit limit◦ Example, if your initial credit limit is $500, the

fees for the first year cannot be more than $125 This limit does not apply to penalty fees,

such as penalties for late payments

Caps on High-Fee Cards

Your credit card company must mail or deliver your credit card bill at least 21days before your payment is due

Your due date should be the same date each month

The payment cut-off time cannot be earlier than 5 p.m. on the due date

If your payment due date is on a weekend or holiday you will have until the following business day to pay

Standard Payment Dates and Times

Standard Payment Dates and Times

On Saturday, Marco paid the full balance of $357 on his credit card at his bank branch. His payment was two days early, since payment wasn’t due until Monday. When his new statement arrived Marco was hit with a $39 late fee and an interest rate increase of 2%. When he contacted the bank he was told he was late because Saturday is not an official business day and since Monday was a holiday, his payment was not posted until Tuesday◦ Can the new credit card rules help Marco?

Can They Do That?

If you make more than the minimum payment on your credit card bill, your credit card company must apply the excess amount to the balance with the highest interest rate

Payments

No double billing Credit card issuers cannot include the

previous billing period when calculating the amount of interest charged in the current billing cycle

The double billing cycle used the average daily balance of the current and previous billing cycles

This is the most expensive way finance charges are calculated

No Two-Cycle Billing

According to a recent Sallie Mae study, college students carried an average balance of $3,173 on their credit cards in 2009

82 percent revolved a balance each month

Underage Consumers

If you are under 21◦ You will need to show that you are able to make

payments, have an independent means of income or you will need a cosigner in order to open a credit card account

◦ If you have a card with a cosigner and want an increase in the credit limit, your cosigner must agree in writing to the increase

◦ No prescreened card offers can be made to persons under21 unless they have consented to receive such offers

Underage Consumers

Gift cardholder’s protections◦ Gift cards can’t expire for at least 5 years from

the date they were activated◦ Money added to the card at a later date must also

be good for at least 5 years◦ Issuer cannot assess inactivity fees unless you

haven’t used your card for at least 1 year◦ Only charged 1 fee per month

Gift Cards

fairfaxcounty.gov/consumer

These rules do not apply to: Prepaid cards

◦ Long-distance telephone services◦ Wireless telephone service◦ VoIP access time

Reloadable cards that are not intended for gift giving◦ Payroll cards◦ Flexible spending account cards

Cards Not Included

Loyalty, award, or promotional gift cards that are given as a reward or as part of a promotion

You must be clearly informed of any explanation dates or fees for these cards

Cards Not Included

Gift card funds aren’t guaranteed and may become worthless if the issuer fails

Buy from a business you know and trust Consider the financial condition of the

business and whether it has filed or may file for bankruptcy

Gift Card Alert

Advertisements for free credit reports must state that free credit reports are available under federal law at AnnualCreditReport.com

This disclosure will help consumers avoid confusing “free” offers that actually require consumers to spend money on credit monitoring or other products or services

Nationwide consumer reporting agencies have to delay any advertising for products or services on AnnualCreditReport.com until after consumers get their free credit reports

Credit Reports

Your credit card company cannot charge you a fee of more than $25 unless:◦ One of your last six payments was late. The fee

may be up to $35◦ Credit card company can show that the costs it

incurs as a result of late payments justify a higher fee

◦ Credit card company cannot charge a late payment fee that is greater than your minimum payments

◦ If you exceed your credit limit by $5 you can’t be charged an over-the-limit fee of more than $5

Reasonable Penalty Fees

No inactivity fees◦ You can’t be charged a fee for not using your card

One-fee limit◦ You can’t be charged more than 1 fee for a single

transaction that violated your cardholder agreement

◦ You can’t be charged more than 1 fee for a single late payment

Fee Protections

If your APR is increased, the credit card company must tell you why

After your APR is increased, the credit card company must re-evaluate your rate increase every 6 months

If appropriate, it must reduce your rate within 45 days after completing the evaluation

Rate Increase

Marco has a $3000 balance on his Fly Forever Express card. He was notified in writing that on 45 days, the interest rate on his balance would increase from 12% to 29%. The card issuer explained that the increased rate was necessary due to market conditions

◦ What advice do you have for Marco?

Can They Do That?

Mel has a balance of $10,502 on his credit card. After losing his job, he stopped using the card but was more than 60 days late 1 time on his payment. The credit card company gave him notice that his interest rate would increase from 15% to 36%◦ Can the bank do this?◦ What are Mel’s options?

Can They Do That?

Pay on time Stay below your credit limit Avoid unnecessary fees Pay more than the minimum payment Read and watch for changes in the terms of

your agreement

Get the Most from Your Credit Cards

Overdraft – when you make a purchase or ATM transaction but don’t have enough money in your account to pay for it◦ Your bank must get your permission to cover

overdrafts Opt-in – Give your bank permission to cover

your overdraw and charge a fee Opt-out – Bank cannot automatically charge

you a fee. Your transaction may be declined Does not cover checks or automatic bill

payments

Debit and ATM Cards

Sample – Notice

Debit and ATM Cards

Annual fee Cash advance fee Balance transfer fee Over-the-limit fee Late fees Lost or stolen card fee Return payment fee Foreign transaction fee Copy fee

Types of Credit Card Fees

12000 Government Center Parkway, Suite 433Fairfax, Virginia 22035703-222-8435 TTY 711

www.fairfaxcounty.gov/consumerconsumer@fairfaxcounty.gov

Contact Consumer Affairs