The first phase of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act went into effect Thursday, Aug. 26, 2009. The CARD act gives credit card users the choice to say “No” if their credit card company increases their interest rates and the company must notify consumers at least three weeks in advance before the interest rate will increase.

To prepare for the first phase of the CARD acts, credit card companies began closing accounts, raising interest rates, and cutting limits since making these changes will be harder with the new restrictions.

This phase of the act requires credit card companies to:

• Give consumers at least 21 days to pay their monthly credit card bill before being billed with late fees.
• Inform customers at least 45 days in advance before raising the interest rate on a credit card account. Currently, credit card companies only need to give a 15 day notice.
• Give customers the right to opt out of the high interest rate and fee increases by canceling their accounts while paying off their balances under the older, lower interest rates. Before, credit card companies could choose whether or not to let people cancel their accounts. Now consumers have the choice as to whether or not they want to keep their account under the higher interest rate.

These changes pave the way for the later phases of the CARD Act which will require credit card companies to be more transparent in their dealings and to give the consumer more information in their accounts.

In the future phases of the act, credit card companies will face restrictions on interest rate increases, bans from marketing and giving credit cards to young adults, and restrictions on gift certificates (the freebies that credit card companies use to entice people to sign up for their cards). The act will also require companies to let their consumers know about fees and monthly statements.

This act will change the way credit card companies have traditionally operated. Everyday consumers are now federally required to receive more information about credit card company operations. This allows people to know where their money is going so that more can stay in their pockets.

For more information, see the White House’s fact sheet about the reforms.