Columbia, MD, March 03, 2010 --(PR.com
)-- Executives at Debt Shield, a Maryland-based debt settlement company, are alerting consumers to new credit card provisions that went into effect last week.
The final provisions of the Credit CARD Act, which went into effect February 22, are aimed at protecting consumers; however creditors are poised to recoup financial losses in ways that could still negatively affect credit card holders.
"Major protections for consumers, especially regarding interest rates, will negatively affect creditors, which is why many will attempt alternative ways to make up their profit losses," explained Debt Shield CEO Phil Fewster. "Consumers are protected in some important ways, but they still need to stay alert."
Some creditors have already raised interest and created additional fees in preparation of profit-cutting provisions. Going forward, creditors could instate inactivity fees, annual fees or charge consumers for receiving paper bills.
"Now more than ever, it is crucial that consumers carefully read all notices and statements they get from their creditors," explained Fewster.
Under the law, creditors can no longer raise interest rates without warning, unless the rate hike falls under one of three exceptions. Creditors can raise rates if 1) the consumer is more than 60 days late with their payment, 2) the promotional rate has expired, or 3) the consumer has a variable rate card (as opposed to a fixed rate card). Aside from these exceptions, creditors cannot raise rates during the first year, raise rates on existing balances, and they must reinstate a lower rate if a late payment is followed up by 6 months of on-time payments. Moreover, borrowers are now allowed to decline interest rate hikes, close the account and pay off the balance at the current rate.
The law also provides protections for consumers under 21 who cannot be issued a card without proof of income or an adult cosigner. Credit card companies are also required to disclose how long it will take and how much it will cost to pay off the balance paying only the minimum payments. The law also prohibits shifting monthly due dates as well as issuing over-the-limit fees (unless the consumer agrees to allow transactions that push them over their limit).
"These provisions ensure greater transparency and limit some unfair creditor practices, but consumers shouldn't let down their guards," said Fewster. "The law does not cap interest rates or prohibit adding new fees."
Fewster encourages consumers to learn about the new law and understand their own credit card agreements, but most importantly he urges consumers to limit credit card purchases to emergency situations.
"Consumers tend to get into trouble when they are forced to rely on credit for everyday purchases like groceries and gas," said Fewster. "While this law is a step in the right direction, consumers are far better off when they are able to avoid using credit cards in the first place."
For more information about the Credit CARD Act, visit the Center for Responsible Lending at http://www.responsiblelending.org/credit-cards/policy-legislation/congress/Highlights-of-the-New-Credit-Card-Rules-What-They-Do-and-Don-t-Do.html.