credit card bailout
The Credit Card Bailout Myth Busted
When analysts talk about credit card bailout, they may be referring to the Credit Card Accountability Responsibility and Disclosure Act of 2009, which implemented some much-needed reforms in the industry.
- Credit Card Companies, under the new act, cannot arbitrarily change the rate of interest. Now they have to give at least a 45 days notice to the customers. The customer also has 3 billing cycles to decline the new rates, without incurring any penalties.
- Companies have to send the credit statements to the customers, 21 days in advance, so that they have enough time to respond (earlier this time limit was just 14 days). The companies were also required to consider payments made before 1700 EST on the due date, as on-time payments.
- Under this act, companies are required to have transparent deals. They will have to make their contact details like customer service phone numbers and email IDs readily available.
- The reforms also restrict the companies from using ambiguous terms like 'Prime Rate' and 'Fixed Rate'. Card companies cannot charge late payment fees, if the customer has a proof of payment sent at least 7 days before the due date.
- The reforms also restrict companies from charging exorbitant 'Over the Limit' fees. The new act also intends to prevent double cycle billing, wherein companies charged interest on debt that was paid on time.
- Reforms made in payment allocation bind the companies to adjust payments made by customers against transactions with high interest rates; for example, cash advances. Under the new act, customers can set their own 'limit' and have a fixed credit limit. This will put curbs on charges levied on crossing the credit limit.
- To protect the vulnerable population, the new reforms prohibit companies from selling cards to people under the age of 21. They can only do this, if the said person has a cosigner who is over 21. Companies are also prohibited from charging any fees from customers for not using the card.