The credit card reform law, otherwise known as the CARD Act, goes into effect on the 22nd of this month, and it's going to change a lot of things about the way your credit card issuers treat you. They won't be able to spike your interest rate just because they feel like it, for instance, and they'll have to spell out a lot more of the details about your relationship.
Gail Cunningham, a spokesperson for the National Foundation for Credit Counseling, advises consumers to take a good, hard look at their revamped statements for details about what's changed. For starters, card companies will now have to include detailed information about how long it will take you to pay off your balance if you only make the minimum payment required every month. Cunningham says too many Americans have no idea how long it takes to pay down a debt by only paying the minimum; many also have no idea exactly how much in interest they're forking over to the credit card company every month.
"If you're the average family who carries $10,000 in credit-card debt and you have an interest rate of 18%, and you pay your minimum 2% of the balance every month, it's going to take you 48 years to pay off that debt," she told WalletPop in a recent interview. Think that's bad enough? You'll also pay nearly $27,000 in interest over that time period. Cunningham says that requiring issuers to spell this out in black and white, along with what it would take for consumers to pay down their debt within three years, will be a much-needed reality check for many Americans.
Another potential lifesaver: Card companies will now have to print right on the statements a toll-free number beleaguered consumers can call for nonprofit credit counseling. Americans drowning in debt will now know that help is available, and they'll be sent to legitimate nonprofit organizations for assistance rather than worrying about being taken advantage of by scam artists and for-profit credit "repair" companies that prey on the financially downtrodden.
One final bit of advice from the NFCC's Cunningham: "People have to open everything that comes from their creditor," she says. As per the CARD Act, issuers have to give you 45 days' notice of any major changes, and you have the right to accept them or close the account. So it's in their interest to make that important information look as much as possible like junk mail that will get tossed, unopened.
But don't throw away that vital information. As Cunningham cautions, "It's your financial future at risk."
Why you should take a new look at your credit card statements