Credit Card Reform Can Impact Consumers with Poor Credit

By Michele Lerner
Mortgage Credit Problems Columnist

Consumers with extensive credit card debt are typically looking for debt relief in a variety of ways, including debt consolidation loans. While the CARD Act is meant to protect consumers against predatory credit card companies, consumers already struggling with too much debt may want to complete the form on this page to see if a debt consolidation loan is the right solution for their needs.

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CARD Act Features

  • Universal Default: Credit card companies can no longer practice "universal default." This allowed creditors to increase your interest rate just because you were late or over-the-limit on another credit card.
  • Payment extensions: Every credit card customer now has 21 days to make a payment after the bill is delivered instead of 14 days.
  • Interest rates: Rates cannot be increased on existing balances, only on new charges. Additionally, companies must notify you 45 days before raising your interest rates. You can cancel your card and pay off the existing balance at the original rate. (But be careful--canceling a credit card can lower your credit score, a problem for people with bad credit who are applying for a debt consolidation loan).
  • Penalties: Credit card companies penalize customers with credit card debt who are late on their payments by increasing their interest rates and lowering their credit limits. Now penalty interest rates can only be applied if your payment is 60 days late. If you make the rest of your payments on time, your rate must be lowered to the original rate after six months. Penalties must be "reasonable and proportional" as defined by the Federal Reserve.
  • Payments: Your credit card bill often has charges with different interest rates. From now on, your payment must be applied first to the balance with the highest interest rate.
  • Promotional rates: Introductory rates, such as "Zero interest on balance transfers" must last for at least six months.

CARD Act and Debt Consolidation

Your credit card statement now has to show you how long it will take to pay your total balance and how much you can save in interest by making more than the minimum payment. This will likely encourage consumers to put themselves on a credit card diet and increase their drive to pay off their credit card debt.

If you need help with debt relief, complete the form on this page to apply for a debt consolidation loan.


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