Individual Credit Card Bill of Rights

Unfair Rate Hikes

In 2009, President Obama signed into law the Credit CARD Act, also known as the Credit Card Bill of Rights, which provides several protections for consumers who use credit cards, including ending unfair interest rate hikes. Credit card companies are prohibited from "any time, any reason" rate hikes, including applying higher interest charges to retroactive balances. It also restricts late-payment rate hikes. In "First Year" protection, rates must be clearly spelled out to borrowers. In the "Fair Interest Calculation," lenders must apply excess payments to the highest interest balance first, and this section also eliminates the confusing "double cycle" billing practice.

The Credit CARD Act also addresses excessive fees. Late fee traps, such as weekend due dates, have been eliminated. Borrowers have an option to "opt in" or "opt out" of fees for exceeding their credit limit. Those who opt out would have their transaction rejected and avoid over-the-limit fees. Those who opt in will have their transaction completed, but are charged the fee for being over the limit. Lenders must give borrowers at least 21 days to pay the balance due. Due dates can no longer change every month, and payment deadlines cannot fall in the middle of the day. Fees for gift cards and sub-prime cards were restricted as well. Also, inactivity fees are restricted for the first 12 months.

The Credit CARD Act also states that card issuers must provide account terms in plain English to borrowers, along with information about what happens if the borrower defaults or if he elects to pay the balance over time. Credit card contracts must be posted on the Internet and in a usable format, as opposed to being available in hard copy only. Regulators must enforce these laws and report to Congress annually. Issuers face stiffer penalties if any part of the Credit CARD Act is ignored. Finally, the Credit CARD Act restricts marketing tactics used to recruit college students and other young adults, and agreements between lenders and universities must be disclosed.

According to the Federal Trade Commission, the Fair Credit Reporting Act helps to ensure the accuracy and privacy of information contained in consumers' credit histories. Consumers have a right to request one free credit report per year from each of the three major credit reporting bureaus -- Equifax, Experian, and TransUnion. The copies of free credit reports can be obtained through AnnualCreditReport.com. You may also receive a free report if you've recently been denied credit or if you're unemployed and will be searching for a job within the next 60 days. Consumers also have the right to know who or what has been seeking credit history information about them.

The Equal Credit Opportunity Act provides consumers protection against credit discrimination because of age, race, gender, nationality, religion, marital status or receipt of public assistance. In addition, consumers should regularly check their statements for errors that may have an adverse effect on their credit scores. The Fair Credit Billing Act (FCBA) provides an avenue to correct mistakes, such as payments not being properly applied to an account. The FCBA usually applies to revolving credit accounts, such as credit cards.

Consumers have the right to dispute inaccurate information contained on their credit reports. If negative information is accurate, only time can remove it: Don't purchase an "instant credit repair" program for a fee. If you are having trouble paying your bills, you have the right to contact a credit counseling organization. (Choose a reputable nonprofit credit counseling organization, such as the National Foundation for Credit Counseling.) You also have the right to settle your delinquent debts or to declare bankruptcy, although these choices typically are last-resort solutions and will have a lasting negative effect on your credit rating.