ROANOKE RAPIDS — Roanoke Valley credit card holders will see changes to their bills and to their terms and conditions thanks to a new law that went into effect on Feb. 22.

Advertisement

The Federal Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act) of 2009 became law after being signed by President Barack Obama on May 22. The act applies to all credit card holders, including those in the Roanoke Valley.

Among the key provisions that went into effect Feb. 22, some make more of an impact on card holders than others. One noticeable difference is visible on the front of bills issued after the provisions became law — consumers now can see how long it will take to pay off their credit card balance, if they only make minimum payments.

“The average consumer pays more than the minimum,” said Nessa Feddis, vice president and senior counsel for the American Bankers Association. “There are some people who look at the minimum as ‘that’s what I should pay.’ This will alert them it’s a good idea to pay more. It still serves as a reminder of the consequences of only paying the minimum.”

The new law affects interest rates as well. “The interest rate can’t go up the first year,” Feddis explained. “Interest rates may not increase on existing balances except under very limited exceptions.”

Consumers will also notice they are getting their bills earlier than in previous days. “Statements have to be sent out 21 days before the due date,” Feddis said. “Most were doing that. It was previously 14 days. (Consumers) are less likely to pay a penalty fee because they get their statements earlier. The due date has to be the same every month. It means more predictability.”

Credit card companies must also give much more notice to consumers of any changes in their terms or conditions. Cards must now give consumers 45 days notice of changes. “New disclosures have to be easy to spot and using terms consumers can easily understand,” Feddis stated. “Forty-five days is plenty of time to find another card.”

People looking for another card could find it a bit more difficult to find new credit, depending on their credit history. “Income for credit cards is not a great predictor,” Feddis asserted. “Credit history is by far the much more predictive of whether somebody’s going to repay.” Credit card companies can now demand greater documentation for new credit, which could cause inconveniences for anyone looking for a card. “People new to credit or who have had problems in the past, will find out they will encounter more fees and find out they will have lower limits.”

However, this hasn’t stopped card issuers from sending out solicitations. “We’re still seeing mailboxes filled with applications,” Feddis said. “But right now there’s a rush toward the high credit scorers — the high-quality borrowers will still have lots of options.”

Young people, between the ages of 18 and 21, will also find it harder to get credit. “For younger people, they have to demonstrate independence of repayment; they have to have a job,” Feddis said. “Because it may be harder for some people to get a credit card, it means it will delay them building a credit history.”

Annual fees, which went out of fashion when the economy was good, have begun coming back as well, although Feddis explained how long fees remain fashionable for credit issuers is up to the consumers. “We’re in a period of transition and experimentation,” she stated. “Consumers’ response will determine whether a fee is sustainable. It’s really up to consumers what their credit cards will look like in the future.”

Feddis also feels the payment priority option will affect consumers. This means any payment over the minimum balance must be applied to higher interest transactions first. “It means they get paid off more quickly,” Feddis explained.

The new law gives greater control to consumers, but has also led some issuers to be choosier. But Feddis tells consumers they shouldn’t be afraid to close an account if they feel dissatisfied with their issuers.

“One of the things that people are afraid of is that they think if they close an account it will affect their credit score,” Feddis stated. “That’s been exaggerated. It only affects their score if they’re doing it a lot.”