In the November issue of the University of Tennessee FCS Family Ties newsletter, Family Economics Professor Dena Wise reminds consumers planning to use credit cards for holiday purchases to be aware that some credit card companies may be charging additional interest and fees over the holidays. These additional charges take advantage of the final few months before the new federal regulations on credit cards go into effect at the end of February, 2010.

The Credit Card Accountability, Responsibility and Disclosure (CARD) act, signed into law by the President in May 2009, was the most significant piece of credit protection legislation for consumers since the 1960s. Provisions related to 45-day prior notice of interest rate increases went into effect in September 2009. Most provisions, however, will not go into effect until Feb. 22, 2010. Under the new regulations:

• Retroactive interest rate increases will be prohibited unless an account is more than 60 days overdue. Retroactive interest currently allows credit card companies to raise interest on charges previously made under a lesser interest rate. For example, if your credit card balance is $600, and the credit card company wants to increase interest, the increase currently applies to the $600 plus any new charges. After the act goes into effect, interest rate increases can only be applied to new charges.

• If a penalty rate increase is accessed because of a late payment, the interest rate must be returned to the previous rate after the cardholder’s payments are current for 6 months.

• After a cardholder gets a new card, the interest rate cannot increase for a year. In the case of a promotional rate, the promotional rate must be in effect at least 6 months.

• The cardholder must be notified at least 45 days in advance of significant changes in credit card terms.

• Universal default and doublecycle billing will be prohibited. Under universal default, if a cardholder is late paying one card, interest rates can be increased on the cardholder’s other cards. Double-cycle billing allows credit card companies to figure interest on the average balance over a two-month, rather than one month period to maximize the amount on which the cardholder pays interest.

• Cardholders will be able to avoid over the limit fees by electing to have charges that would put them over the limit denied at the point of purchase.

• Under the new legislation, billings will have to be mailed at least 21 days before they are due, and payment received by 5 P.M. on the due date must be credited to that day’s payment. Late payment deadlines and postmark dates are also required to be clearly shown on the statement.

• Credit card statements must also clearly show how long it would take to pay off a credit card balance if cardholder makes only the minimum payment each month. Statements must also show the total cost in interest and principal payments if a cardholder makes only the minimum payment each month.

• Young people under the age of 21 must have an adult co-signer or show proof of adequate income for repayment before they can be issued a card. Credit card companies will not be able to make “preapproval” offers of credit cards to young people under the age of 21 unless they specifically opt-in for offers.

• Young people requiring cosigners will be required to receive permission from parents or guardians in order to increase credit limit on joint accounts they hold with those adults. Wise also reminds us that as always, the best plan is to charge only what you can pay for at the end of the month, and pay your credit card bill in full well before its due date.