February 12th, 2010
What To Do Before the CARD Act Goes Into Effect
The next wave of credit card industry reforms kicks in February 22, and it’s wise to take stock of your cache of credit cards to prepare for any changes that may sideswipe you, your wallet, and your credit score.
Follow these five smart credit moves before the legislation goes into effect so your credit portfolio and credit standing can benefit from the added protection:
- Pay attention of your credit card’s terms and conditions. Increased transparency is a main objective of the CARD Act, so issuers are required to simplify and clarify billing statements so consumers know exactly what they are getting into. Review your bank’s re-vamped credit card billing statements, like Bank of America’s. They should clearly illustrate the terms and conditions of your card. If you find the APR is too high or the benefits are meager, maybe it’s time to switch.
- Also, any changes to your card? Look out for any changes to your credit card. The reforms do not set a cap on interest rates, restrict increases to minimum monthly payments, require issuers to give you notice of lowered limits or cancelled cards, or prohibit annual fees. Look out for any mail from your issuer or call direct and inquire.
- Consumers under 21 years old, get a card. Once the reforms take effect, it will be tougher for young consumers to get a credit card; restrictions include having a co-signer over 21 years old, or show proof of ability to pay. If you are a young consumers consider a student credit card or prepaid card, but, as always, make sure you are ready to take on the responsibilities of a credit card.
- Keep your cards active. As reforms crack down on money-gouging industry practices, issuers are looking for ways to profit from your account. Keep all your current cards active by charging a small amount to each card monthly and paying in full every month. Charging groceries on one card and drugstore purchases on another helps keep you off with the lists that charge you dormancy/inactive fees, reduce your credit limit, and close your account, all of which damage your budget and credit score.
- In the market for a new card? Wait. New credit card accounts will be protected from interest rate increases for the first year. Also, there will likely to be good credit card offers, like balance transfer cards or annual-fee free cards, flooding the market for people with good credit as issuers compete for the best customers.
Even if you have good credit and faithfully pay monthly, there will be a period of adjustment as issuers conform to the legislation, so remain vigilant of your credit cards and any mail from issuers to safeguard your credit score.
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nice post. thanks.
thanks for the heads up