Take Full Advantage of the New Credit Card Rules

by Odysseas Papadimitriou on February 23, 2010

Credit Card WalletAs you might have heard, the new credit card law (i.e. the Card ACT) went into effect yesterday. The provisions of the new law that will impact most of us are the ones around interest rates, overlimit fees, payment allocation, and monthly statements.

Here is a quick summary of what you should know so that you can take full advantage of these pro-consumer changes:

Watch interest rates

The new rules will make it harder for credit card companies to raise a customer’s rates across the board. Under the so-called universal default practice, a consumer who was late on a payment for one credit card might have seen the interest rate rise on that card and another, unrelated credit card.

Be aware that interest rate hikes are going away using the first year an account is open and on existing balances. But card companies will still be able to raise interest rates in some cases, such as when you are more than 60 days late paying your bill or an introductory rate expires after six months.

Another huge exception: Issuers can raise your rate before the first 12 months is up if your rate is a variable one tied to an index and that index rises. These indexes are at historic lows, but when rates begin to rise to keep inflation at bay, so will your payments.

Watch over-limit fees

Another major change involves the fee charged when a consumer charges more than his or her credit limit. Until now, many card companies have allowed consumers to continue charging beyond set limits, tacking on sometimes hefty over-the-limit fees in the process. Cardholders will now have to “opt-in” for over-the-limit spending.

Payment Allocation

With the new rules, card issuers have to apply payments to the part of a bill with the higher interest rate. For example, if an account has a $5,000 balance with a regular rate of 15 percent, and a $5,000 balance at a promotional rate of 5 percent, the monthly payment must be applied first to the balance with the 15 percent rate.

Monthly Statements

Credit card statements will have to show how long it will take to pay off a credit card if only minimum payments are made. The statements will also have to show how a consumer may pay off the entire bill in 36 months if payments are increased.

Finally, if you are looking for more information you should also read our full analysis of the new credit card law.


Just for the record, HSBC/Orchard bank saw the law coming and acted quickly (before the law came into effect) and raised my interest rates to nearly 3 times what they had been. This was despite the fact I had faithfully paid my accounts early...
August 15 at 13:47 pm
I think it's known as the CARD Act, not the Card ACT.
May 10 at 13:51 pm
I like the idea of my payment due date being the same each month. It makes it a lot easier for me to remember when my payment is due.

March 24 at 05:23 am
On split % accounts, ie 15% and 5%, what two credit card companies have told me is that the minimum payment goes to the LOWER rate and any payment over the minimum goes to the HIGHER rate. Can you clarify which is correct? Thanks.
February 27 at 05:06 am
Odysseas Papadimitriou
With the new rules, the entire amount of your payment will go to the higher rate. Please let us know if in 1 week (they need time to get their act together :) ) -- they tell you diffently.
March 1 at 11:05 am
No, Bill is correct. Minimum payment can be allocated anyway the issuer chooses - most often lowest APR categories first.
May 10 at 13:50 pm
Viewers and readers shd. take good advantage of when the full amount wil be paid off i.e the amortization clause, as compared with paying it off 36 or 60 months. You will save a ton.
February 25 at 11:04 am
Great summary! The only thing that I have is that people under the age of 21 are treated like 2nd class citizens.
February 24 at 16:22 pm

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