The Credit Card Accountability Responsibility and Disclosure Act, or the CARD Act, is good news for all credit card holders. The act contains many provisions which are beneficial to card holders, especially pertaining to revision of interest rates by the lender.
For new accounts, rates will now be fixed except under four situations when the rate can be hiked:
1. You have been given a promotional rate
2. A variable rate moving up in line with prevailing rates
3 . At the end of a pre-arranged agreement
4. Delay in payment of dues by over 60 days
However, even in these situations, the issuer is required to make necessary disclosures. For example, in the last case, the issuer must state clearly that the rate increase is caused because of delay and he must cut back the rate to original levels if you make your payment on time for the following 6 months.
Card holders can rest assured that issuers can no longer apply unjustified and unexpected rate revisions on the basis of arbitrary reasons. Increasing market rates or damaged credit standing will no longer count as reasonable grounds for rate increases.
Another good news for card holders is that other than under these four conditions, all existing outstanding balances are safe from rate hikes. Moreover, default by the card holder to one creditor will not affect the rate given to him by other banks. However, with sufficient notice, rate hikes can be applied on future balances. Any rate hike must now be accompanied by adequate notice time as well as an option to reject the terms and pull out of the agreement.
Yet another change in current procedures brought about by the CARD Act is that issuers must now necessarily apply any payments from the card user to the highest interest rate amounts rather than the other way around. In addition, the purchases and paybacks made in the current cycle will be used for calculating charges, thus doing away with double cycling. This means that card users get the maximum benefit out of payments made by them.
Finally, the act also makes room for lowering interest rates. When a customer’s interest rate is increased owing to external conditions, the bank must also conduct half yearly reviews to judge if the rate can be lowered based on changes in the conditions. On the whole, the CARD Act is all set to make using credit cards a much more pleasant experience.