On Feb. 22, 2010 the Credit Card Accountability Responsibility and Disclosure Act of 2009 made by Congress is finally going to come into full effect. I believe this act is definitely going to have plenty of positive effects, especially on students. “With this bill we’re putting in place some common sense reforms,” President Barack Obama said at the signing at The White House.
This act is going to change the way credit card companies advertise for their product and to whom they sell them too. Credit card companies constantly stand outside of venues like baseball and football games with free blankets, t-shirts and other give-aways to try and get teens to sign up for a credit card. When teens end up signing up, a lot of teens end up in debt. Majority of debt in today’s society comes from the younger generation because they don’t acquire the strong jobs to be paying back their balances each month and on time.
With that said, this act will stop anyone under the age of 21 from having a credit card, unless they have a co-signer that can prove they have sufficient income. Therefore, if you are under the age of 21 and able to pay back your balances, you can get a credit card. You must send in an application for the credit card with a document that proves that you will be able to pay back the balance.
A second way for a young person to get a credit card is with a co-signer similar to the procedure you would use when getting a loan. However, a co-signer’s credit rating may be affected if the young person is unable to pay their balances. In the incident of a late payment, the co-signer’s credit rating is also affected and is liable for the debt.
The length of the billing cycle has been clarified and lengthened. A longer billing cycle has been established. A notice will be issued 21 days beforehand to prevent borrowers from forgetting. People are so busy today that they forget about due dates and when they have to pay their balances. Currently the mailing statement of the bill comes 14 days prior.
Paying the minimum of what is due will often affect your credit rating negatively, giving you a lower rate. Paying higher than the minimum balance will give you the highest interest rate. In the midst of the recession, money is hard to come by. This act is going to take some of the pressure off of that and give fair warning to cardholders as to when their bill is due.
Credit card companies are required to offer a limit that cannot be exceeded when using your card. This is helpful because if you don’t go over your limit, card companies cannot send you fees for going over the limit. These fees for exceeding the limit are very high and make it even more difficult to keep up with payments. This new act would prevent companies from charging over $5,000 for extra fees.
If cardholers are able to keep up with deadlines and payments, it is possible that they can restore their credit rating and decrease their interest.
This new act expects people to pay off their balances and not spend more than what they are making. “The law is for people who found out that credit cards are a one-way street. It’s easy to get in but almost impossible to get out,” President Obama said.