Legal, Regulatory, and Privacy Issues

How to cope until new credit card law takes effect


Consumer advocates say cardholders should wean themselves off of credit cards, pay down debt and pay on time during this period before new protections kick in.

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The toughest credit card rules in history were signed into law by President Barack Obama May 22, 2009, but that doesn’t mean change will come overnight.

The first of the consumer protections started Aug. 20, 2009, when mandatory 45 days’ advance notice of significant credit card changes went into effect. The most significant consumer protections — limiting interest rate hikes to only a few circumstances — won’t start until Feb. 22, 2010. Gift card rules don’t start until Aug. 22, 2010.

“The truth is that the changes aren’t going to take effect anytime soon,” says Gail Cunningham, spokeswoman for the National Foundation for Consumer Credit (NFCC).

“The issuers have to make significant internal changes technically and to their business models, and that takes time. There are two schools of thought about whether or not the creditors will continue changing the terms,” Cunningham adds. “Some feel that there’s been so much bad press that it will stop. Others think that they will continue until they are forced to stop.”

What should consumers do in the meantime? Credit experts say you should keep up with the basics of handling credit:

  • Watch those monthly statements.
  • Pay off as much credit card debt as possible.
  • Reduce spending to avoid relying on credit to meet basic living needs.
 Credit card reform and you

In addition, “The savvy consumer might consider obtaining additional lines of credit while they can in case the bottom falls out with their existing creditor,” advises Cunningham. “Many people have been blindsided by having their card limit lowered to very close to their existing balance, thus limiting additional access to credit. Others have had their cards closed. For years, I taught that a wallet full of credit cards doesn’t impress anyone other than your brother-in-law, but in today’s environment it’s good advice to have a few. I’m not suggesting that people apply for many, just one or two additional cards. Charge a little each month to keep them active, and pay the bill in full when it arrives.”

Until the new federal law kicks in (See What the new credit card rules mean to you), she recommends consumers carefully read all mail and correspondence from creditors.

“All those mail stuffers, start reading those,” she says. Cardholders “need to really keep a close eye on that for any change in terms, such as the annual percentage rate and the credit limit. If they see any change in the terms, they need to contact their creditor immediately and find out why.”

Ask to speak to a supervisor and ask about opting out of the interest rate increase, she says.

When making credit card payments, pay early, don’t miss any payments and pay at least the minimum (preferably more), Cunningham says, adding that bills may be delayed in the U.S. mail and cardholders may not have as much time as they think to get a payment in before the deadline.

Credit card videos
For more on this topic, check out this video:
Credit card video: Credit CARD Act to bring big changes

“You better open that bill and pay it that day,” Cunningham says. “We’re seeing many 20-day grace periods. Why risk having a ding on your credit score?”

Another good rule: Don’t max out your credit cards. Try to keep balances at 30 percent of the credit limit or lower. Not doing so, “puts you into the risk category in the creditors’ eyes. What they really like to see is a credit utilization ratio of no more than 30 percent,” Cunningham says. “If you exceed 30 percent, devote any extra money you have to paying that down to get it into the range of 30 percent or less.”

See related: Credit card reform and you, Obama signs credit card reform bill into lawA comprehensive guide to the new Credit CARD Act, What people are saying about the new credit card law, Interactive timeline: How the credit card reform bill became law and when its provisions take effect, Annual fees return in credit card mail offers, House easily passes credit card reform, Senate passes tough new credit card reform bill, House passes Credit Cardholders’ Bill of Rights

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