Credit card reform bill approved by Senate

05.20.09
By Sarah Beldo

By now, you may have heard that on Tuesday the Senate passed legislation aimed at placing stricter limits on credit card company practices.

Lawmakers say the bill should be ready for President Obama's signature by the end of the week. But what will the new rules mean for you?

One of the most important changes curtails issuers' power to arbitrarily raise interest rates on existing balances. Depending on which version of the bill becomes final, lenders will have to wait until a customer is either 30 or 60 days late with a payment before hiking the rate on these balances.

Meanwhile, people who are paying off debt with varying interest rates - such as purchases and cash advances made with the same card - will have any payment above the minimum applied to the debt with the highest rate. Proponents say this will help consumers pay off credit card debt faster.

Another measure contained in the legislation requires credit card companies to give cardholders 45 days' notice before they raise their interest rate.

Also, consumers should find themselves subject to fewer surprise fees that come when they accidentally exceed their credit limit. Under the new rules, cardholders must opt in before their issuer will allow them to overspend.

Some of the other provisions of the Senate bill include a ban on double-cycle billing, tighter controls on how credit cards are marketed to those under 21 and a requirement that issuers send out bills 21 days before the payment is due rather than the current 14.

However, remember that credit card companies have nine months before the new laws go into effect, a period which they may use to continue to raise rates and impose fees.

"They will go kicking and screaming into the night on this one," consumer advocate Adam Levin told CBS News.

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Lawmakers say the bill should be ready for President Obama's signature by the end of the week.