New Federal Credit Card Law - 5 Things Consumers Need to Know

Consumer Credit Counseling Service of Greater Atlanta Offers Tips to Help Consumers Navigate Changes

ATLANTA, Feb. 18 /PRNewswire-USNewswire/ -- On February 22, most provisions of a new Federal Credit Card Law will go into effect. While many of the changes are designed to help protect card holders, it is still important that consumers practice sound credit management.

"Despite changing requirements for credit card companies, consumers should not use credit cards as emergency savings accounts or to purchase items they cannot afford," said Mechel Glass, director of education for Consumer Credit Counseling Service (CCCS) of Greater Atlanta. "Using credit wisely is the most sensible way to build, and maintain, a solid credit history."

CCCS shares 5 things consumers need to know about the new Federal Credit Card Law.

1. Rate Increases and Credit Limits. Under the new law, credit card companies must extend promotional rates for at least 6 months and, in general, rates cannot be raised on existing balances unless you are more than 60 days late with your payment. Creditors may lower credit limits or close accounts without prior notice to cardholders.
   
   "Consumers who are more than 60 days late and experience a rate increase are eligible to have the original rate restored after six consecutive months of on-time payments," said Glass. Creditors may still raise rates on new balances with a 45 day notice to cardholders, compared to the 15 days required under prior legislation, and there is no cap on interest rates.
   
   Purchases may be declined if a credit limit has been reduced and a pending purchase would result in going over the limit. Institutions may offer consumers the option of exceeding their limit in exchange for fees, but only one "over the limit" fee may be charged in a billing cycle. "Make sure you clearly understand the fees involved," said Glass.
   
2. Payment Protection and an end to Double Billing. Payments received on the due date, or the following day if the creditor was closed and did not accept payment, are considered on time, as are payments made at a local branch. This can help consumers avoid late fees, as payments must be processed the same day they are received.
   
   "Under the new law, consumers cannot be charged interest twice on the same balance," added Glass. The practice of basing finance charges on current and previous balances is no longer permitted.

1. How to Keep Your Credit Card "Active"
   One by-product of the new law is that some credit card companies may close a consumer's account if they see a card is unused.  To keep your credit cards "active," Glass recommends that consumers may want to purchase gasoline once a month with a credit card and pay it off quickly. She says this recommendation will help consumers who have low balances on credit cards that otherwise may be closed by their card company due to inactivity.

1. More Favorable Payment Allocation and Timing
   In most cases, current credit card agreements outline plans to apply payments to the lowest rate balances first. Under the new law, any payment above the minimum amount due must be applied to the highest rate balances first. In a provision that went into effect last August, credit card companies must send statements 21 days in advance of the payment due date, compared to 14 under the old requirements.
   
2. Gift card protection
   Of the $87 billion dollars in gift cards estimated to be purchased in 2009, approximately 6 percent, or $5 billion dollars will go unused. Many will be eroded by fees and eventually expire without ever providing a benefit to the recipient. Under the new law, gift cards will not be able to expire for at least 5 years, and inactivity fees will not be able to begin before 1 year after the card is issued.

Changes in the credit card law are designed to help consumers be better fiscal managers. To help consumers navigate the new requirements, Glass recommends that consumers continue to use credit wisely. "Use credit cards only to make purchases that you are prepared to pay off when the bill comes in. Pay bills in advance of the due date and work toward creating an emergency savings account that will reduce dependence on credit in the event of unplanned events."

Need help getting your credit under control or understanding how the new laws might impact you? CCCS can help. Our certified counselors can help you review your current financial situation and work with you to create a budget and financial plan to get you back on track. Contact CCCS at

800-251-2227 or online at www.cccsinc.org or www.cccsenespanol.org.

About CCCS of Greater Atlanta

CCCS of Greater Atlanta serves clients in all 50 states and has 33 offices in four states. It is the headquarters for the CredAbility Network, a family of nonprofit agencies serving consumers in north Georgia, south and central Florida, middle Mississippi and east Tennessee as well as nationally via telephone and Internet.  

CCCS is accredited by the Council on Accreditation and is a member of the Better Business Bureau and the National Foundation for Credit Counseling (NFCC).  Governed by a community-based board of directors, CCCS is funded by creditors, clients, contributors and grants from foundations, businesses and government agencies. CCCS offers around the-clock help by phone at 1-800-251-CCCS or at its Web sites, www.cccsinc.org and www.cccsenespanol.org.

SOURCE Consumer Credit Counseling Service of Greater Atlanta