If your credit card statement is this frightening, take advantage of the provisions of the Credit Card Act. (Photo Credit: CC BY/Jason Rogers/Flickr)

In 2009, President Obama signed the Credit Card Act into law. One of the provisions of the law is that credit card companies, in conjunction with the National Foundation for Credit Counseling, must provide resources for consumers who have difficulty with their finances. While they’ve held up their end of the bargain, recent NFCC studies have found that consumers simply aren’t taking advantage, reports Bankrate.

Free credit counseling, fallen by the wayside

Only 150,000 U.S. consumers struggling with credit card debt have accessed the nonprofit help to which banks and the NFCC have access, said NFCC spokeswoman Gail Cunningham. The contact number is toll-free and printed on credit card statements. As credit card debit still weighs heavily on the average, recession-weary American, the lack of initiative is troubling.

“I certainly think one of the reasons for the low response rate from consumers could be attributed to a lack of prominence,” said Cunningham. “Perhaps the number is buried somewhere.”

Within the recesses of public prejudice might be where that number is buried. Experts believe that many consumers who see the toll-free Credit Card Act number on their credit card statement may think it’s yet another “service” from the big, bad credit card company to take their money. However, Cunningham has observed that the number has been absent from some statements, which would be a violation of law.

Credit card debt shrunk in 2010

A study by Credit Karma indicates that from January to December, U.S. consumer credit card debt decreased by 8 percent nationally, to an average of $7,404 per person. Eight states, including California, Colorado, Connecticut, Indiana, Oklahoma, Tennessee and Nevada, showed as much as an 11 percent improvement.Wisconsin made the biggest dent in credit card debt, slashing and burning through the credit jungle for a 31-percent improvement over 2009.

On the other side of the scale, states like Delaware, Iowa, Louisiana, Missouri, Nebraska and New Mexico grew their credit card debt by as much as 6 percent. Mississippi was the biggest loser in the Credit Karma Survey, with 8 percent growth.

Looking for credit card help?

Visit the National Foundation for Credit Counseling website at nfcc.org for the information on non-profits near you that can help. The Federal Reserve’s website also has a free calculator with which you can calculate how much you’ll owe if you only make the minimum monthly payment on your credit card. For your mobile, there’s a useful Android Market app called Personal Financial Calculator. Or, if you are looking to compare overdraft APRs of installment loans and other consumer loan products, check out our “Loan Overdraft Calculator,” linked below.

Sources

Android Market: Personal Financial Calculator

Bankrate.com

Federal Reserve

Loan overdraft calculator

National Foundation for Credit Counseling

Obama signed the Credit Card Act. Are you using its programs?

Major credit card companies spend millions on college credit card agreements allowing them to recruit customers on campus. Image: Thinkstock

Credit card companies pay colleges millions of dollars for the right to market their cards on campus. A Federal Reserve report on college credit card agreements said that Bank of America was by far the most aggressive, paying colleges and alumni associations $62 million in 2009. The Fed report is part of a Credit Card Act provision passed earlier this year requiring credit card companies to disclose how much they pay schools to market their products.

College credit card agreements

Credit card companies paid a total of $83.5 million to colleges in order to recruit card holders on their campuses. That money netted 53,164 new student credit card accounts, according to the Fed report. The University of Notre Dame got more money than any other school from Chase Bank USA, which paid $1.8 million and ended up with just 77 new customers. FIA Card Services, the credit card arm of Bank of America, paid $1.5 million to the University of Southern California to net 659 new accounts.

Loan card rakes in penalty fees

A controversial credit card that started appearing on college campuses this year is called Higher One from MasterCard. It’s called a “loan card” to circumvent new credit card rules that prohibit such things as charging customers for inactive accounts. Higher One was created to make money off students’ financial aid. But card holders are charged a $19 monthly penalty for accounts that aren’t used for nine months. Higher One racked up $27 million in sales in its most recent quarter. More than three-quarters of that money came from fees charged to merchants and students.

Big banks on campus

The Fed report on college credit card agreements collected information on 1,044 campus deals made by 17 credit card companies. Bank of America’s FIA, U.S. Bank and Chase own 96 percent of all the college credit card agreements in 2009. FIA led all card issuers with 906 separate agreements that account for 1.61 million student credit card accounts.

Sources

CNN

Washington Post

Philadelphia Inquirer

Changes in payment allocation from CARD Act

The CARD Act changed payment allocation rules by requiring that credit card companies apply consumers’ payments to the balance with the highest APR first, thereby paying down their most expensive debt as quickly as possible. However, in the final draft of the bill, the language was changed to say only payments above the minimum should be applied to the balance with the highest APR first. The minimum payment amount is still applied to the lowest APR first, which means extra costs for consumers and extra profits for credit card companies.

The Bill Was Changed Unfavorably In Committee

Senator Dodd introduced a bill on Feb. 11, 2009 (S.414) that proposed a payment allocation method that would apply the consumer’s entire payment to the balance with the highest APR first. However, during negotiations in the committee process, the committee reported an amended bill that changed the rule to only apply to payments above the minimum to the highest APR first.

How this affects consumers

The change in the language means a portion of everyone’s payments is allocated in an unfair manner. Even more troublesome, the 29 percent of Americans who can only afford to pay the minimum* have 100 percent of their payments allocated in a way that prevents them from paying down their most expensive debt. The people who need the most help are getting no benefit from the new rules meant to protect them.

How to avoid the pitfalls of payment allocation

Unless consumers are able to pay at least 15 percent of their credit card balance each month, they should only carry one type of balance on each credit card. Have a separate credit card for balance transfers and purchases – one credit card with a low interest rate on purchases and one with a low interest rate on balance transfers. Otherwise, just as in the old system, credit card companies will be able to delay consumers from paying down their credit card balances with the highest APRs.

* Source: FINRA National Survey – Financial Capability in the United States, December 2009

When it comes to credit cards, many consumers have been getting shafted. All of the major banks providing credit cards have gotten away with reaping profits, and they have no problem lobbying and distributing the money to any Washington lawmaker that get in their way. Washington lawmakers are getting this dirty money from these banks to keep their regulatory laws and their profits in tact so it will not affect the credit card industry if it becomes law in a few years. During George W. Bush’s presidential terms, if anyone attempted to change any provision regarding the credit card regulatory laws, the changes were usually fizzled out and swept under the rug. The credit card industry was fine and there were more choices for the consumers and there was no reason to amend anything. There was no credit card reform in sight.

On the other hand, the United States has been in a recession and we have a new president and an administration in Washington, and they have made credit card reform one of their top priorities. The credit card industry is directly linked to consumer debt and as a result, the industry must be reformed. In May of 2009, the Credit CARD Act of 2009 was implemented. However, the bill’s first provisions were not in effect until just recently.

Things you should consider if you are a credit cardholder.

1. There must be a written notice forty-five days in advance by the credit cardholder if your interest rate of your credit card has increased.
   This will eliminate the unethical practice of allowing lenders to raise your interest rates on your account that is outstanding, delinquent, or unrelated to other credit card companies.
2. Credit card companies are prohibited from changing terms of your original contract. They can no longer charge you at any time or for any reason.
   You will no longer get an automatic late fee on your credit card because the payment due date fell on a non-business day or non-work day at your bank. If your due date falls on a holiday or a weekend, the due date will fall on the next business day and this is now required by law.
3. Credit cardholders are allowed twenty-one days to pay their credit card balances instead of the minimum fourteen day period.
   Credit cardholders are now given three billing cycles to pay off their balances via existing terms if the interest rate has skyrocketed.
4. It is required that all payments are allocated in portions of the credit card balance with the highest interest rate descending the lowest interest rate.
   Your highest rates are paid first, which was not always the case before.
5. Limitations on the limit fees that are now three per credit card account.
   Unlimited limit fees are very common; many lenders had this practice in place for credit cardholders that exceeded over their credit limit.

The credit card companies do not want you to read the Credit CARD Act of 2009.

There are more provisions in the Credit Card Act of 2009; this is just the tip of the iceberg. Credit card companies could not care less about consumers; they have no trouble raising interest rates, limit fees, and other restrictions that have not even reached the full level of potential in regards to regulation. The thing that is most shocking about these new regulations mentioned above is that banks and credit card companies would not agree to any of these provisions if they were not enforced by the law.

Credit card companies and banks will not stop their unethical practices for the sake of the consumers.

Several banks are still spending large amounts of lobbying money trying to halt this legislation, despite public outrage about the bailout money fiasco several months ago. These banks are attempting to make it easier on the credit card industry by watering down the Credit CARD Act’s provisions. This is an indicator that the credit card companies and the banks have abused their credit card practices and screwing the American people in the process for the past two decades.

For more information about the provisions of the Credit CARD Act of 2009:

http://www.govtrack.us/congress/billtext.xpd?bill=h111-627

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