The credit CARD Act of 2009 just went into effect as of Feb. 19, 2010. It will affect the credit card companies in a big way, as well as consumers. The major credit card companies say that they will lose as much as half a billion dollars each this year as a result of the new laws. It is important to protect consumers, but is it healthy to stifle businesses in down economy?

CARD Intent & Benefits

This act was created to protect card holders, and will give them some extra checks and balances before they are able to get deep into debt.

Minimum Payment Advisory

One thing in the CARD act that will help consumers is that credit card companies will have to print on the statement how long it will take to pay off the balance, if they only make minimum payments. It will become glaringly obvious that people are just digging themselves into a hole by paying the minimum every month. Its easy to forget that you are paying an extra 15% interest on your money, when you just see that small minimum payment in bold print.

Targeting College Students with Freebies

Another part of the act that was made to help consumers lose the habit of taking on a lot of debt, is the restrictions on cards for college students. Credit cards are given away at college campuses like they are concert tickets. There is always a booth that gives out free t-shirts, hats, and a credit card along with it. These new laws are going to change that. They require people under the age of 21 to get a co-signer, unless they can demonstrate the ability that the can actually pay the balance. (Apparently, that wasn’t a requirement to get one in 2009) The average student graduates with over $4,000 worth of credit card debt. Maybe these new laws, will help students break the habit before they become debt ridden adults.

45 Days Notice to Changes

Have you ever been blindsided by a change in terms? The CARD Act has instituted a new rule that I think most consumers will really like. Credit card companies must give 45 days notice before they change any term of their cards. This includes interest rates, late payment fees, or yearly fees. And for the 1st year you have the card, you cannot get your interest rates increased at all. This will make it easier to switch if a company baits you in with a low rate, then jacks it up.

CARD Oversight & Consequences

There are some definite benefits to these new laws, but there might also be some unintended consequences.

Lost Income Will Be Replaced With New Sources

Companies are now restricted how they make their money, which is why their income will dwindle. This will cause them to come up with new sources to make up for their lost revenue. For example, there is no cap on interest rates at all. Recently a Delaware bank created the highest interest rate credit card in history targeted at sub-prime cardholders. This card had an interest rate of almost 80%! (the average is about 15%)

There also may be new yearly fees, processing fees, and new fees on balance transfers. These fees will affect every credit card holder, not just students or people with poor credit. Credit card companies generate a lot of revenue and will think up other ways to make up where they’ve lost it. We are all going to paying extra because of that.

CARD: Both Good And Bad

There are some definite positives and negatives to these new laws. For people that aren’t very conscious about money issues, it will be very helpful. It might help to stop the cycle of debt before it gets a chance to start.

But, people that aren’t as responsible about their money are the credit card companies best customers. This is where they make their biggest percentage of profits. So with less of these people available, extra fees will end up hitting everyone else like a smack in the face. It remains to be seen how significant these fees are going to be, but with the loss of half a billion dollars per year, per company, it will have to be for them to survive.