The new Credit Card Accountability, Responsibility, and Disclosure Act became law in May, triggering sweeping reform of the credit card industry.
Among the changes that credit card companies will be subject to are the elimination of double-cycle billing, opt-in requirements for over-the-limit protection, increases in rate not allowed unless borrower is 60 days or more past due, and payments required to be applied to highest rate balance first.
Although on the surface this appears to be a great thing for consumers, it may actually come back to bite them. Many of the practices that have been eliminated through CARD were large sources of revenue for credit card providers. Because of the loss of revenue, credit card companies are now forced to re-underwrite or close as many accounts as possible before the law takes effect next spring. Consumers will feel the pinch in the form of higher rates, closed accounts, annual fees, and lower credit limits. Once the law does take effect, credit in general is sure to tighten which is not good for the overall economy.
