The Credit Card Accountability, Responsibility, And Disclosure (CARD) Act Of 2009- Effect On Credit Card Holders

In the last year or more, credit cards and the laws that govern the industry have come under serious scrutiny due to the large amounts of individuals and families facing serious debt problems involving credit cards.  Card holders have been subjected to stiff fees and increasing interest rates for seemingly no reason, leaving many so far behind in payments, they had no where to turn.  As the credit card industry began to spiral seriously out of control, Congress finally began to take action on behalf of the affected consumers.

Credit card practices have been unfair and deceptive for quite some time
and changes need to be made to continue a healthy economy.  In May 2009, President Obama signed into law the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009.  The action was meant to create more protection for consumers and halt unfair and hidden fees they were being charged for being a credit card holder.

The highlights of the CARD ACT of 2009 for consumers’ sake are as follows:

Unfair Fees Banned
Credit card companies are no longer able to induce unfair rate hikes and there are no longer allowances for rate increases for any time, any reason, or by universal default.  There are also no retroactive increases allowed because of a late payment.  Cardholders are also to be given reasonable time of at least 21 days to make monthly payments.  The CARD Act also prohibits changing due dates, weekend deadlines, and payment deadlines that are due in the middle of the day.

Interest Adjustments
Credit card issuers are now required to apply all additional payments to the highest interest balance first.  This measure will stop the practice of ‘double-cycle billing’ where the previous month was used to calculate interest charges for the following month.In the past, additional payments were applied to the lowest interest balances leaving the higher balances earning more interest for the credit card company.

Clearer Terminology
All contracts and card terms must be clear in language with details spelled out for the consumer.  The terms of the contract are not allowed to change for the first year.  All promotions must be plainly disclosed.

Opt-In for Overages
Consumers must now approve transactions that would place their credit card balance over the limit rather than automatically suffer the over-the-limit penalties caused by overdrawing on the account.

Sub-Prime Fees Restricted
All fees on low-limit, bad-credit credit cards would be restricted. Many consumers with less-than-perfect credit scores were being charged ridiculously high fees and penalties because of their credit status.

Consequence Clause
Credit card issuers must now show the consequences of negative credit actions, including the release of periodic statements concerning the length of time it would take to pay off existing credit card balances and the total cost of the interest that will be paid back.

Changes for Youth Credit
The CARD Act pays special attention to credit cards being marketed and issued to young adults and college students.  The credit cards issuers and respective universities must disclose all agreements made regarding the marketing of credit cards on campuses.

Gift Card Changes
The CARD Act introduces protection for gift and store cards in which fees can not be placed on inactive cards and all card terms must be clearly disclosed.

Accountability Assistance
While the law has many advantages for consumer protection, it also puts accountability on the credit card companies and those that regulate them.  Regulators have a duty to report to Congress each year to advise of protection enforcement for consumers and credit cards.  Card issuers that are in violation of the restrictions and credit card laws will be charged significant penalties which have been increased dramatically with the new law.

Consumers have been crying out for help for some time as many were falling into debt and ultimately filing bankruptcy while their credit cards accounts were still being charged or even canceled without reason.  While many consumers will benefit from the changes to the credit card industry, some feel as though the new legislation will make it more difficult for people to actually get credit cards in the first place.

There are some interesting changes here and I think overall this will help in protecting the consumer.  Unfortunately, this could also mean the end to many no fee and low interest rate credit cards.  Now more than ever, you need to make sure your credit scores are as high as they can be in order to get the best rates and advantages from your credit cards.  Credit card companies have already started rolling out changes and have started raising rates before the legislation takes full effect.

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Published or updated May 30, 2013.


  1. Great job clarifying the information in the CARD Act! It’s about time there has been some regulation for these card companies that think they can wield the mighty sword!
    .-= Jason @ Redeeming Riches´s last blog ..Credit Card Rewards Duel: Knight Rewards vs Challenger Avoid =-.

    • I have no problem that credit card companies have power, after all we are borrowing their money, it’s just that their terms need to be clear and fair for all people. I think this act helps in that regard.

  2. Personally, I just avoid using credit cards all together. This keeps me safe from their sneaky practices without the need for any legislation. When consumers stop using and abusing credit cards, then the industry will have to clean up its act or go by the wayside.
    .-= Jeff@MySuperChargedLife´s last blog ..Debt Free Now What: Moving Beyond the Financial Basics =-.

    • Problem is we are a nation addicted to credit! But I agree, if you hardly use a credit card or always pay off the debt then you avoid most of their practices that could hurt you. Let’s hope they don’t come up with other ways to make up for the lost revenue!

  3. John DeFlumeri Jr says:

    You explained it all in easy to understand terms. Good job!

    John DeFlumeri Jr
    .-= John DeFlumeri Jr´s last blog ..Podcast* "Six People for Every Job Position!" =-.

  4. I made my first money mistakes when i got my first credit card, I thought I was in position to deal with my finances, I had a job was working on my career, and had some savings in the bank. I thought it was the cool thing to have a credit card since the balance was $300 anyway; five years later, I had three cards and over $10,000 in credit card debt.
    BAD IDEA!!
    We have paid all credit cards we own and not planning to use them again.
    .-= Joe´s last blog ..Avoiding a financial shipwreck for teens =-.

    • Sounds a lot like my story and I’m sure many others! Mine are paid off but we still use our cards, we just pay off the balances monthly.

  5. WellHeeled says:

    Very informative. I’ve included it in my Run ‘Round the Blogosphere here:

    I really like the clear terminology clause – consumers find it hard to be informed if the rules are unclear.

    • Thanks for including it!

      I can see a credit card pamphlet now – about 3″ across, tiny words, and writing that sounds like I need my lawyer to decipher it. Yes, they need to make their terminology clearer for sure!

  6. Great post FFB, but beware of unethical companies trying to game the system and work around the loopholes of the CARD act: For example I offer, First Premier Bank Exploits Credit Card loophole – for 79.9% APR!.

    Essentially, the CARD act limits fees and when rates can rise but says nothing about how high a rate can be…

    It’s a sub-prime card, but that only makes it’s worse in many ways, since it’s sticking it to people who have already shown to be in financial trouble…
    .-= Joe Morgan´s last blog ..First Premier Bank Exploits Credit Card loophole – for 79.9% APR! =-.

    • I can only imagine what ways credit card companies will find to get back their revenue!

      But another way to look at it is if you are bad with credit should you be getting a credit card? Some people almost ask for the high rates. Just saying it’s not all the credit card company’s fault.

  7. I wonder how Bank of America likes the ruling concerning elimination of payment due in the middle of the day? I got nailed for a late fee because the payment came after 3pm EST thats 12 noon on the west coast. I had made the payment 4:30pm on their website. The customer service rep said he would only refund half the late fee. What a bunch of swindlers. Bank of America is the WORST bank I’ve ever dealt with. Avoid them like the plague!!!

    • Yeah, I’ve had some close calls with cutoff times. I have a car payment that is due by a specific MST. I’m on the east coast so MST isn’t something I even think about. The first time I paid I figured as long as I got the payment in that day I should be OK. I was sweating when I saw the cutoff.

      It’s good that arbitrary things like a time cutoff are eliminated. Have you tried to tell them that you will move your business elsewhere? Sometimes that can work to eliminate a fee like that (though you may have to be prepared to move your account). Try asking for retentions.

  8. I’m so glad that this passed. I know there are a lot of egregious things that the credit card companies do, but the one that frustrates me is that when they raise your interest rate they raise it on your past balance as well. I can understand if a company wants to raise the interest rate on a future purchase, but that’s money I’ve already borrowed at an agreed rate.

    I guess I don’t have to worry about that anymore 🙂

  9. susan welsh says:

    I am in college writing a paper on credit cards. My question, how would the decline of credit card use, affect us as consumers? And what industries would suffer from this, banks, companies, and Federal Reserves? Where would this information be located?

  10. So suddenly, my credit limits have been slashed by all my credit card companies to just above what I currently owe. We have not been late on these cards. For example, home depot slashed our limit from 17k to 5k. As a result, my credit used to avail. credit ratio shot up and lowered my FICO score. Recourse?

    • You can try calling the companies and ask to have your limits raised. Another possibility it transferring your debts to another card (0% preferably), which would give you better ratios on the original cards and with a good transfer rate you could pay off the debt faster, which should ultimately be the goal.

      These are just suggestions.

  11. Kobena Greenlee says:

    I would like to bring to your attention the late fee policy of Orchard Bank. It is their policy to charge a late fee even if the consumer makes the payment on the payment due date. Their policy is concerned with the payment method on the due date which may subject the consumer to a late fee. If the consumer makes a payment online, on the correct due date, after 5pm PST then the consumer’s payment is considered late and the account is subject to a late fee. On the other hand, if the consumer makes the payment at the same time via a customer service agent, the payment is not considered late as is therefore not subject to the same late fee. According to Orchard bank, if payment is made via phone by 11:59pm on the due date, then it is not late, however, if made via the online payment portal, the payment is late. Please be aware of this fee consumers and cancel your Orchard Bank credit cards. This company is has unethical practices and we should not let them succeed.

    • I’ve seen other cards and companies put a time restriction on the payment due date.

      The best way to avoid this is to make sure you are paying a few days before to ensure your funds go through.

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