Only making the minimum monthly payment on your credit card bill? A new federal law requires credit card companies to show you just how much it’s costing you
On February 22nd, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act) will go into effect.
One of the provisions of the act that has drawn the most commentary is the requirement that credit card statements show how long it will take the cardholder to pay off their balance if they make only the minimum monthly payments – and how much doing so will truly cost them.
Under the CARD Act, each statement must show the long-term savings of paying off your balance in three years. It must also tell you the amount of monthly payment you would need to make in order to pay off the balance within that time.
The goal of the provision is to help consumers realize the financial pitfalls of only making the minimum payment each month.
For expert opinions on what effect the disclosures will have on consumers’ behavior, see this piece from the Milwaukee Journal Sentinel.
This disclosure requirement is among several other consumer-friendly rules that will go into effect as a result of the new federal law. For more on the CARD Act, including several provisions affecting interest rate increases, see this piece from credit.com entitled “Understanding the Credit Card Accountability Responsibility and Disclosure Act.”
If you are facing mounting credit card debt, a bankruptcy attorney can explain your legal options and help you decide if bankruptcy is the right option for your financial situation.