Back to School for Credit Card Companies

On August 22, the last phase of the Credit CARD Act took effect, bringing lots of new regulations that should benefit college students and young adults who are managing credit cards and grappling with budget worksheets.
Sept. 22, 2010 - PRLog -- On August 22, the last phase of the Credit CARD Act took effect, bringing lots of new regulations that should benefit college students and young adults who are managing credit cards and grappling with budget worksheets. Our financial gurus here at financiafootprint broke down the new rules to figure out how they will actually affect you. So browse this list and increase your financial education.

The Credit CARD Act:

Rewarding good behavior:
We all know that over-spending on your credit card is a dangerous behavior. But did you know that in the past, credit card companies would charge fees for not using your card enough? Sheesh, now that’s sketchy behavior! As of August 22, credit card companies can no longer charge you for not using your card. However, if your card has not been used for a long time, the credit card company can choose to close your account (at no extra charge to you), which can negatively affect your credit score. Want to learn more about credit cards and your credit score? Check out financialfootprint’s recent blog post.

Oops! Going over your Credit Limit:
In the past, when you accidentally spent over your credit limit, credit card companies would tack on outrageous fees. The new rule says that credit card companies can only charge a fee equivalent to the amount that you went over and cannot exceed 25% of your credit limit. So, if you went over your credit limit spending $3.95 on iTunes, your credit card company could only charge you $3.95 in fees for your misdeed. Even better, The Credit CARD Act requires credit card companies to give you a choice about spending limits:

Option A—you can choose to have your transactions declined if you accidentally try to over-spend.

Option B—you can choose to be permitted to over-spend, knowing that you will have to pay a fee whenever you do.

What’s the best financial solution? Choose Option A. While it’s embarrassing to have your credit card declined at the cash register, a moment of embarrassment is worth saving your hard-earned money and your credit score. Either way, the best practice is to know your credit card spending limit, and to stay well within that limit each month. At financialfootprint,  you can connect and meet with your own Personal Finance Guide who will help you decipher your credit card bills, understand your credit limits, and manage your student finances.

Don’t be tardy! Late bill payments:
In the past, credit card companies would tack on humongous late fees if you were late paying your bill. Now, if you are occasionally forgetful, your late fee will be capped at $25. However, late fees can go higher if cardholders are late more than once in a six-month period. This is good news, but I can think of a lot of things I’d rather do with 25 bucks. Moral of the story? Pay your bills on time, and don’t be tardy!

Eating their Young:
In the past, credit card companies made loads of money by giving pre-approved credit cards to teenagers and college students who didn’t know how to manage their student finances. Young people racked up debt, saddling themselves with poor credit scores that followed them into adulthood. In February 2010, the Credit CARD Act banned credit card companies from issuing cards to people younger than age 21, unless they have adult co-signers or proof that they can repay their debts. Companies are also forbidden from mailing prescreened credit cards to people younger than age 21.

Debt: The Freshman $15,000
Congress found out that many colleges had lucrative deals with credit card companies, allowing exploitation of their own students. So one of the new credit card laws restricts the “recruitment” activity that credit card companies can do on college campuses, forbidding them from offering free pizza, gifts, and other “goodies” as incentives to sign up for new cards. The law also forces colleges to report their interactions with these companies. College is traditionally the first place where young adults begin to accrue debt through student loans, credit card bills, rent payments, and other expenditures. Yet most colleges struggle with providing personalized educational support in these areas. financialfootprint is here to help by offering relevant personal finance guidance and advice to young adults to help them better manage finances on their own.  financialfootprint can provide guidance on a range of personal finance topics including: college financial planning, student loan repayment strategies, managing credit, student finances, creating a budget, etc.

All about Gift Cards:
Gift cards to our favorite stores and websites are popular birthday and holiday presents. But in the past, consumers were often cheated by early expiration dates and other hidden fees and “surprises.” With the Credit CARD Act, gift cards cannot expire for at least five years. And starting January 31, 2011, gift card issuers must tell you about any other rules and fees. And, like the credit cards, gift cards can no longer charge you “dormancy fees” (fees for not using them), unless you do not use them within a year. After that, they can charge you a fee every month. So make sure you use those gift cards in the first 12 months to get your money’s worth!

Older Changes:
Phase I of the Credit CARD Act began in August 2009 and included some other big changes, like giving consumers at least 45 days advance warning of significant changes to their accounts (such as raising your interest rates!). It also required banks and credit unions to give you at least 21 days to pay your monthly credit card bills.

The Credit CARD Act contains the toughest credit card regulations in the history of the industry, and these changes should pay off big for young adults and college students. For more information on credit cards, student loans, budgeting, college financial planning, managing debt, student finances, and other financial solutions, check out our website at

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