Credit CARD Act to protect young consumers
Cecily Long
Issue date: 2/4/10 Section: News
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It's estimated that Americans have $900 billion charged on their credit cards today.
"I have two credit cards and I pay off the balance every month," said Christina Stotts, a sophomore nursing major from Brookland.
Stotts said she uses her card for food and gas in order to get the reward points they offer, but said that if she makes a large purchase she won't use her card for those things until it's paid off.
Beginning Feb. 22 the Credit Card Accountability Responsibility and Disclosure Act of 2009, or Credit CARD Act of 2009, will go into effect.
The act is designed to protect consumers by giving new rules to credit card issuers about how they are allowed to solicit new customers and how they should handle existing customers' accounts.
The new rules include:
• Issue notices of account modification at least 45 days in advance.
• Increase rates only on new charges, while applying the old rate to exiting balances.
• Deliver credit card bill at least 21 days before payment due date.
• Protect consumers under the age 21 by making them show that they are able to make payments or have a cosigner, in order to open a credit card account.
While these new rules are to help consumers, some reports, including one from the Jutia Group Web site, a site managed by finance professionals, said the new rules will cost the banking industry as much as $50 billion in lost revenues.
Also there are loopholes in the new rules. For instance, credit card companies can't raise rates on existing balances unless the payment is 60 days late, but they can raise rates on future purchases at any time, as long as they give consumers a 45-day warning.
Also the prohibition against raising rates applies only to fixed-rate cards, not variable-rate cards. New fees and penalties on existing balances can also be applied.
Dan Marburger, economics professor, found information that was shocking to him in the recent Sallie Mae credit card report "How Undergraduate Students use Credit Cards."
The report compares credit card usage from 2004 with credit card usage of 2008. According to their report, 84 percent of undergraduates have credit cards compared to 76 percent in 2004.
What are students buying with their credit cards?
The report shows the number one expense in 2008 for students with credit cards was food at 84 percent. Clothing with 70 percent came second and cosmetics with 69 percent came third.
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