More control over fees, fees, fees
Every year Americans pay $15 billion in credit card penalty fees.
The CARD Act has two main provisions to protect consumers from unfair fees and penalties.
First, credit card companies must give consumers at least 21 days to pay their bills. Also, they must set due dates that are consistent each month. No weekend, holiday, or middle-of-the-day payment deadlines.
Second, consumers must opt in to over-limit fees. Before, if a consumer tried to buy a $50 item but only had a $20 available balance on his credit card, his card would be accepted. On his next statement he’d have been charged a fee. The amount of the fee ranged between $20 and $40, depending on the financial institution.
Now, a consumer must opt in to over-limit fees. If he doesn’t, that $50 purchase would be declined and he would not be charged a fee.
Stay off my campus
To protect young consumers, the CARD Act prohibits credit card companies from marketing on or near (any closer than 1,000 yards) college campuses or at a school-related event.
Also, card issuers are prohibited from offering anything tangible to encourage young people to sign up for credit cards. Tangible items include T-shirts, iPods, or gift certificates.
18? Wait or get a job
Before the CARD Act, receiving a credit card offer on your 18th birthday could have been seen as a rite of passage into the adult world.
Now, companies can’t give a credit card to anyone younger than 21 years old. If someone is underage and wants to open a credit card, a cosigner or proof of income and means to pay is required.You can opt out of credit card offers!
Be smart about credit
Despite the protections offered by the CARD Act, whether or not you end up with credit card debt is largely a result of your choices.
A credit card can be a great way for a young adult to build a credit history. Here are some guidelines:
- Consider asking your parents to co-sign on a small limit credit card from your credit union.
- Ask at your credit union if it has a student credit card. It might have better rewards and different terms geared toward students.
- Make your payments on time. One-third of your credit score is based on payment history.
- Pay the balance in full each month. Don’t charge more than you can afford. Just because the money's there doesn’t mean you should spend it.
- Check your credit report annually. Visit annualcreditreport.com to get a free copy of your credit report. Even if you don’t have any credit cards or loans, still get a copy. You want to make sure no one has opened accounts in your name.
Learn healthy credit and money habits while in high school and college. That way, it’ll be easier and second nature to continue it when you graduate.
Just remember, although the CARD Act is there to protect you from unfair credit card practices, it’s not there to protect you from yourself. Be smart with your credit cards.