Sweeping new rules are in effect as of Monday to better protect Americans from sudden hikes in interest rates on credit cards.
The Credit Card Accountability, Responsibility and Disclosure Act of 2009 should protect consumers from unfair credit card practices. But before you go out and swipe your card at a local store, here are five things you need to know about the new law:
1. Credit card companies can't charge you overdraft fees
Americans spend about $15 billion each year in overdraft fees, the White House says. These are fees accrued when you spend more money with your debit card than you have in your bank account. Previously, the bank would allow you to take out that money, but they would also hit you with an overdraft fee.
But this new law will eliminate such fees. However, there is a loophole: you must opt in and tell your bank that they do not have permission to overdraw your accout. The Federal Reserve has more details about the process on their website.
2. You'll receive advance notice before an interest rate hike
Under the new law, companies must provide consumers with 45 days of advance notice before making any major changes to your contract. The big impact comes on interest rates, as companies can't spring a surprise rate hike on you.
3. If you're under 21, you'll need the cash to back it up
Under previous regulations, getting a credit card before your 21st birthday was easy. Now, it's gotten more difficult. The new law forbids credit card companies from issuing a card to the under-21 crowd unless the cardholder, a parent or a co-signer can prove that they can make the required payments. The law also prevents card companies from marketing on college campuses. (Sorry, no more free bank t-shirts the next time you're on campus to tailgate.)
4. Foreign transaction fees will still cost you
Many banks have recently raised fees on purchases made in foreign currencies. When buying things abroad, Citi and Bank of America will now charge you even if your purchase is made in U.S. dollars, according to the Wall Street Journal. Check with your bank for their specific rules.
5. No more retroactive increases (for the first 60 days)
If you're late with your payment, the new law will give you a grace period of 60 days in which your interest rate cannot rise. However, if your payment is more than 60 days late, your interest rate can rise.
Keep in mind: these aren't all of the rules. Check with your bank for their new rules, and pay extra attention to your monthly statements to make sure that you're not being scammed.
