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What You Need to Know About the Credit CARD Act of 2009

Ah, 2009—the year of Jersey Shore, Avatar and that awkward moment when Kanye interrupted T-Swift at the Video Music Awards. But did you know it was also a big year for the credit card industry?

That’s right—in May 2009, President Barack Obama signed the Credit Card Accountability Responsibility and Disclosure Act (aka the CARD Act) to protect users from being taken advantage of by sleazy credit card companies. This was less than a year and a half after the national credit card debt rose above $1 trillion (yes, that’s trillion with a T).1 What?

The CARD act made some major changes to what credit card companies can and can’t do. One of its biggest goals was to keep credit card companies from nickel-and-diming card users to death. And it actually did cut down on over $16 billion of sneaky fees by 2015 (that’s a lot of nickels and dimes).2

But the act doesn’t cover all the ways credit card companies still manage to trick people. And even though the CARD Act was supposed to make it easier for people to understand the fine print that comes with credit cards, it can still get pretty confusing.

But don’t worry—we’re about to break down the CARD Act’s most important changes so you can know exactly where the credit card companies’ power ends and your rights begin.

How the Credit CARD Act Affects You

If you’ve got a credit card (you shouldn’t have one, but we’ll get into that later), then you need to know how much control you have. You also need to know how much the credit card company is allowed to dip into your wallet for interest and fees. Let’s take a look at some of the main protections the CARD Act put in place for credit card consumers (that’s anyone with a credit card) and what they mean for you.  

Restrictions on Interest Rate Increases

  • 45-day rule: This rule is pretty straightforward—credit card companies have to give you a heads-up at least 45 days before they plan to raise your interest rate or make any big changes to your account. This warning also gives you a chance to close your account before the 45 days are up without paying a penalty. And when you close your account, you have at least five years to pay off the balance.
  • Retroactive interest rate increases: Before the CARD Act, credit card companies could raise the interest rate on existing card balances whenever they felt like it with what’s called a retroactive interest rate increase. But now, they can’t raise any of those fees linked to your interest rate (like the annual percentage rate or finance charges) on existing balances or within the first 12 months of a new account.

The exceptions to this are if:

  1. You’re 60 days late on a credit card payment.
  2. Your card has a variable interest rate (where the rate changes based on the Federal Reserve).
  3. You were told your current rate would only last for a certain period of time (sometimes called an introductory rate).

And when issuers offer specific promotional interest rates, those have to last for at least six months before they can change. That way, people don’t get talked into one interest rate only to have it go up a month later.

  • Limited universal default: Even if you always kept your account up to date, credit card companies used to be able to raise your interest rate if you were late on another, unrelated payment (like your utilities, mortgage or other credit cards). This is known as universal default—and it’s universally ridiculous. But now, credit card companies can’t raise your interest rate based on other accounts, unless it’s for a new credit card balance and they give you the 45-day notice.
  • Fixed rates: When a credit card company says fixed rate, they have to mean it. So fixed interest rates can’t change during the time period laid out in your contract. But the same exceptions we listed above for interest rate increases also apply to fixed rate cards, so watch out for those!
  • Interest rate reviews: There are many reasons why a credit card company might raise your interest rates—a lower credit score, what the market looks like, and so on. But under the CARD Act, issuers have to review accounts at least every six months to decide if those reasons are still relevant. So, let’s say they raised your interest rate because you lost your job and had a horrible credit score. Then, a few years later, you had a stable income and a better credit score. In that case, the card issuer would have to lower your interest rate.

Restrictions on Payments and Billing

  • Clear due dates: Credit card companies have to give you “a reasonable amount of time” to pay your bills each month. That means card payments are not due until 21 days after the card statement is mailed or delivered. (Yay for grace periods!) And due dates have to be the same each month so users aren’t caught off guard. Credit card companies also can’t set weird deadlines (like early in the morning) for payments. In fact, it’s illegal to set cutoff times before 5 p.m. on the due date. And if a payment is due on the weekend, a holiday, or when the card company is closed, they can’t charge a late fee for processing the payment the next business day.
  • No double-cycle billing: Before the CARD Act, credit card companies used something called double-cycle billing—which meant they looked at your last two billing cycles (the amount of time between payments) to figure out if they could charge you even more money on your debt. This unfair practice usually meant credit card companies could charge higher interest rates and hit you with extra fees from the past month—even if you already paid that bill off! Now credit card companies can only look at the current billing cycle to calculate interest charges.
  • Highest interest rate balance paid first: There are some credit card accounts that charge different interest rates for different kinds of transactions (ATM withdrawals, purchases, cash advances, etc.), which means you’d have multiple balances on the same card. Card issuers used to take any payments above the minimum amount and automatically put it toward balances with the lowest interest rate. This made it harder for people to pay off the higher interest rate balances, keeping them in debt longer. But now, issuers have to put any payment beyond the minimum toward the balance with the highest interest rate. That’s great news for anyone trying to pay off their credit card debt!
  • Late payment warnings: If a credit card company charges late fees or has a policy of raising interest rates because of late fees, they have to clearly say so on your credit card statement.
  • Minimum payment warnings: Because it doesn’t take long for credit card debt to grow to an insane amount, the CARD Act requires credit card companies to tell users 1) how long it will take to pay off their balance if they only make minimum payments and 2) how much they will have to pay each month to pay off their balance in 36 months. Knowing this information can make all the difference in how fast you get that credit card debt off your back!

Restrictions on Fees

  • Over-limit opt-in: Card issuers used to be able to charge over-limit fees willy-nilly (an over-limit fee is just like it sounds—a fee for spending more than your set credit limit). But one of the biggest restrictions from the CARD Act put a stop to that. Now, you have to give the credit card company permission (or opt in) to allow over-limit transactions, and you must agree to the set over-limit fee. If you don’t, any transactions you try to make that would push you over your credit limit will be automatically denied. Credit card companies used to charge a new fee every month you were over your credit limit. And even if you paid enough to get caught up, an over-limit fee might push you over your credit limit again—which meant another charge. Before you knew it, you’d be trapped in a never-ending cycle of fees! But the CARD Act put restrictions on how many over-limit fees credit card companies can charge in back-to-back billing cycles. Luckily, many credit card companies have done away with over-limit fees altogether, but those that still have them can’t charge you more than the amount you overspent. So, if you went $50 over your credit limit, you can only be charged up to a $50 over-limit fee.
  • Late fee limits: The CARD Act also put limits on how much companies can charge for late payments. The actual number has changed several times since the act was passed, but as of 2019, you can’t be charged more than $28 for the occasional late payment or more than $39 if you’ve been late more than once in a six-month period.3 And issuers can’t charge a late fee that’s more than your minimum payment.
  • Payment type fee: Another fee credit card companies used to sneak in was charging for how you sent your payment—in the mail, by phone, electronically, with a carrier pigeon. But now there’s no fee for how you choose to pay toward your credit card balance, unless you have an expedited payment (when it needs to get there ASAP). And if your payment was late because the card company changed addresses or how it handles payments, you can’t be charged for a late fee up to 60 days after these changes were made.
  • Inactivity fees: Credit card companies used to be able to charge you for not using your credit card for a certain amount of time. Talk about ridiculous! Now, you can use your card as little as you want, and you can’t be charged an inactivity fee.

Other Restrictions

  • Age minimums: Credit card companies start going after customers from an early age. But now, thanks to the CARD Act, they can’t give credit cards to anyone under 21 unless they have their own income or an adult cosigns for them. And remember the days of getting a free T-shirt when you signed up for a credit card? Nowadays, credit card companies can’t even come within 1,000 feet of a college campus if they’re trying to bribe students to apply for a credit card with pizza and other freebies.
  • Gift card expiration rules: Have you ever experienced the joy of going through an old wallet and finding a fully loaded Visa gift card you completely forgot about? What about the disappointment of trying to use it only to find out it’s expired? Thankfully, now gift cards from credit card companies can’t expire until at least five years after it was purchased. But unlike credit cards, gift cards can face dormancy or inactivity fees if there’s less than a certain amount on the card or if it hasn’t been used in 12 months or more. Card companies can only charge you one fee per month, but there’s no limit to how much that fee can be. You can stay on top of this though—because even if it’s in 6-point font and you have to pull out the magnifying glass to read it, all this info has to be listed on the gift card.
  • Subprime card rules: Subprime credit cards (also known as fee harvesting cards) are given to people who either have bad credit or have little to no credit history. Because of this, these cards usually have a higher interest rate, lower credit limit, more fees and less rewards. The CARD Act keeps companies from charging account-opening fees that are more than 25% of the card’s available credit limit in the first year. But card issuers still find loopholes around this rule and do things like charge “processing fees” before the account is opened.
  • Online agreements: Credit card companies have to post copies of cardholder agreements (which detail the terms and conditions of the card) on their website and keep them updated. They also have to send copies of those agreements to the Federal Reserve Board, which you can look up on their website. That way, you have everything you agreed to on file, and it’s harder for the credit card company to go back on their word (even though they’ll definitely try).
  • Mandatory board review: Every two years, the Board Review of Consumer Credit Plans and Regulations (wow, that’s a mouthful) has to review the terms of credit card agreements and how credit card issuers are running their businesses. They study how the CARD Act affects credit card companies, consumers’ credit availability, and the credit card market as a whole. This is to hold creditors accountable and enforce the rules when necessary.

The Bottom Line

Phew! That’s a lot to take in, right? And somehow people still think credit cards make things super convenient. But if you ask us, it sounds super stressful!

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We’re all for putting credit card companies in their place and protecting users from getting taken advantage of—but the Credit CARD Act does not cover everything. Issuers can still raise your interest rate for future balances, and there’s no limit to how high those interest rates can go. Plus, companies still have the power to close accounts and cut credit limits whenever they please without telling you first.

A credit card is not a safety net—it’s a full-on trap in disguise!

Here’s the deal: No matter how many rules the government puts on credit cards, they still have the power to do some serious damage. A credit card is not a safety net—it’s a full-on trap in disguise! Think about it—we use credit cards to buy things before we have the money . . . just so we can use our own money to pay it back later. Then we start the cycle all over again. That’s like riding a merry-go-round and wondering why you’re not getting anywhere. And it only takes one slipup for you to fall off.

Companies wouldn’t be in the business of credit unless they made plenty of money off people who get behind on payments. And the average credit card balance for Americans is $6,870.4 It’s a game that’s rigged from the start. But the good news is, you can stop playing right now!

If you’re tired of living in fear of one missed payment costing you higher interest and fees, let us introduce you to the perfect alternative—a life without credit!

A Life Without Credit

You don’t need a credit card to survive. Yeah, we know your parents, your teachers and your brother’s best friend’s cousin have told you otherwise—but they’re wrong! Did you know you can rent a car, buy a house, and start a business without borrowing money? Yep, it’s totally possible!

What would it be like to pay cash for everything and never have to worry about a credit card bill showing up in the mail or missing a payment ever again? Sounds pretty nice, right? The problem with credit cards, and debt in general, is that they keep you from living in the present because you’re still trying to pay for the past. But it doesn’t have to be that way!

If you’re ready to say goodbye to the pointless cycle of credit and take control of your money once and for all, Financial Peace University (FPU) will show you how. You’ll learn the best way to set up a budget, pay off debt, save like a champ, and build wealth. And the only time you’ll touch a credit card is with a pair of scissors. It’s time to finally feel secure about your finances—Start FPU today and take control of your finances!

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Ramsey Solutions

About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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