Credit card reform bill headed to Obama's desk

In order to push the Credit Card Act quickly onto President Obama's desk, the House of Representatives passed the Senate's version of the credit card reform bill yesterday with 361 representatives voting for the bill and 64 voting against it. If the House hadn't accepted the Senate's version of the bill, passage would have been delayed until the two houses worked out their differences.

A spokesman for President Obama said he would sign the bill on Friday, but don't expect to see the changes any time soon. Congress gave the banks nine months to make the changes. Banks must make all the changes by February 2010.

Here are the key features of The Credit Card Act and what it will mean to you:

* Credit card companies will find it much more difficult to change rates, which is a dramatic shift from the existing environment where issuers can raise rates "at any time, for any reason."

* Credit card companies cannot increase your interest rate during an account's first year. After that first year, a credit card issuer can increase the interest rate if you are 60 days late in making a payment. If they do increase the rate, the new legislation requires them to review your account every six months and lower the rate if the situation warrants it. You will regain your older, lower interest rate if you pay your bills on time.

* Credit card marketing to consumers under 21 will be much more difficult. A parent or guardian must co-sign for anyone under 21-years old, unless the consumer can provide proof that he or she can repay the credit card loan.

* Your creditor must pay off the balance with the highest interest rate first. Currently, credit card companies can apply the payment to the balance with the lowest interest rate.

* Double-cycle billing is banned.

* Credit card companies must disclose how much interest will be paid as well as how much time it will take to pay off the balance if only the minimum monthly payment is made on an account.

* Over-the-limit fees cannot be charged unless a cardholder agrees to allow issuers to complete transactions that breach the credit limit.

* You cannot be charged a fee for paying your bill online or by phone.

* Gift card issuers cannot charge dormancy fees on cards redeemed too late. Also gift cards must be valid for five years.

* Bills must be mailed to you at least 21 days before the balance is due.

* You must get 45 days notice (rather than 15 days) before the rate on your card can be increased.

Even though you must wait nine months for the bill to take effect, that is still earlier than the rules required by the Federal Reserve last year. The Fed required the rules to go into effect in July 2010. The Federal Reserve gave banks 18 months to make these changes.

Lita Epstein has written more than 25 books including the Complete Idiot's Guide to Improving Your Credit Score.

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