What Will Change About Credit Cards

The Senate today passed a credit card reform bill that President Obama called for as a candidate and has pushed for both in a town-hall meeting in New Mexico last week and in his weekly radio/Internet address the previous Saturday. After the populist backlash against government bailouts, this will be something Democrats can hang their hat on if it passes the House, which it's expected to--an example of tighter restrictions on the lending industry and protecting the public from the growing problem of personal debt.


Some had advocated capping credit card interest rates at 15 percent--that didn't pass, and the bill also includes an amendment from Sen. Tom Coburn (R-OK) to allow guns in national parks. But the bill is chock full of restrictions on card companes, so here's a list of changes we'll see with the credit cards, if the bill passes and is signed:

-mandatory 12-point font for applications and disclosures

-no rate increases in the first year of holding a card (barring exceptions like expiration of promotional rates, min. payment not received within a 30-day grace period, failure to comply with a workout plan)

-no retroactive rate increases on existing balances (barring exceptions)

-45 days of notice before rate increases, and the chance for customers to opt out of the new agreement

-promotional rates last at least 6 months

-no fees on balances comprised only of interest accrued from previous cycle; failure to pay such a balance won't put card into default (though cardholder is still obligated to pay)

-no finance charges on balances from previous billing cycle

-payments exceeding minimum go to pay off debt with highest interest rate (if more than one rate applies to different parts of the debt on one card)

-no credit cards unless you're 18 (or emancipated)

-only one credit card per college student (unless you have a verifiable annual income and the credit limits add up to less than 30 percent of that income)

-college student credit limits capped at $500 or 20 percent of the student's annual income, unless a parent, guardian, or spouse assumes joint responsibility of the card

-no fee for paying over the phone or online (unless you pay on the date it's due or the day before)

-no over-the-limit fees unless cardholder has chosen to allow credit card company to process over-the-limit transactions (the alternative being transactions get denied)

-only one over-the-limit fee per billing cycle

-agreements and contracts posted online (except individually negotiated ones)

-signs on stores offering store credit cards

-solicitations include warning that multiple credit inquiries (required to get a card) can lower your credit score

-new regulations from the Fed on credit reporting on active-duty military and veterans who opened credit cards less than two years prior to service

-disclosure that paying only the minimum will increase interest rates and make it take longer to pay off the card

-information provided to cardholder once a year on the time it would take to pay off the card making only minimum payments; the total cost of paying it off; and the monthly payment that would be required to pay off a card in 12 months, 24 months, and 36 months

-one free credit report per year provided in a language other than English to non-English-speakers (credit reporting agencies are already required to give one free per year in English)