Home > Credit Cards > Two Credit CARD Act Loopholes You Need to Know About Right Now

Comments 9 Comments
Advertiser Disclosure


I recently came across two really big—no, make that gargantuan—CARD Act loopholes that no one has made much of a fuss about.

A few weeks ago, I was doing a little “light” reading on Helpwithmybank.gov, which is associated with the Comptroller of the Currency Administrator of National Banks (OCC), and read a Q&A that made me stop in my tracks. It was about what happens when you receive a notice that your credit card’s interest rate (also known as the APR) is going to increase in 45 days.

The question: Can I continue making purchases with my card at the existing rate for 45 days?

The response on Helpwithmybank.gov: “After 14 days, the new rate will apply to further transactions. At the end of the 45-day period, the bank can begin charging the new rate for any balances you accrued after the 14th day after the bank sent the notice.”

“Please note that if your rate is increasing because you were more than 60 days late in making a required payment, the bank can apply the new rate to all your balances.”

[Related: How a 3-Year Debt Payoff Plan Takes Twelve Years]

This response uncovers two astounding loopholes. Let’s take a look at each one.

Loophole #1: If you receive notice of an interest rate increase, your new rate is applied after 14 days—not the 45 days that’s implied under the CARD Act.

Honestly, my first response to this gem was: Are they kidding me? The common belief is that we all have 45 days before the increase takes effect. But according to this response by the OCC, if your interest rate increases, you don’t get 45 days before it takes effect.

Instead, credit card issuers can start applying the new, higher rate just 14 days after notification of the increase is mailed to you. This means that all purchases made after the 14th day are charged at the new APR. You get 45 days before you have to make a payment that includes the higher APR.

I contacted the OCC to make sure this response was accurate and in line with the Credit CARD Act 0f 2009. A spokesman for the OCC said, “After 14 days, the new rate will apply to further transactions.” He confirmed that the 14-day window is a correct interpretation of the CARD Act and that the 14-day period begins with the postmark date on the notification that’s sent to you. I know this is confusing, so here’s an example of a timeline to keep in mind if you receive a notification that your interest rate is going up:

August 1: Your credit card company mails a notification that your APR is increasing from 12 percent to 15 percent.

August 15: Any transactions you make from this day forward are subject to the 15 percent rate.

September 15: At the 45-day point, your statement will reflect your new 15 percent APR. And the 15 percent rate applies to all purchases starting on August 15th.

So why the hoopla over the 45 days notice? Well, you can think of it this way. You can use your 45 days to figure out how you’ll pay a higher interest rate on your purchases. Or you can decide that you don’t accept the new terms and work out a plan to pay off your balance.

[Credit Card Reviews: Credit Cards with Really Low APRs]

Loophole #2: Watch out for the retroactive interest rate increase »

Pages: 1 2 3

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Pingback: 5 Ways Romney Will Rollback Consumer Protections | ComparePlastic()

  • Pingback: 5 Ways Romney Will Rollback Consumer Protections | Credit.com News + Advice()

  • Fedup Withallofthis

    The credit card companies are all a joke! I know someone that inherited 500K. At the time, they were going thru a divorce. They threw the $ in a corporation and then filed bankruptcy. No worries! Meanwhile, my husband and I paid off a mortgage but had high credit card balances due to an injury. Our credit score is in the tank now, even tho we have a paid off mortgage, always on time.

    Until transparency is an issue, we will ALL get screwed! It takes a rocket scientist to figure out the FICO rules so forget the average joe ever getting a clue.

    Bottom line, if u have MONEY, u get to play because u can pay someone to guide u. if u are broke forget about it!

  • Mrsas

    This may happen with any student loans as well, due to bank affliations, so make sure you monitor all that is affliated when it comes to borrowing from any banks or lenders when it comes to any financial matters.

  • Beverly Harzog

    Benjoh–Thanks for your comment. I confirmed with the The Fed that the 14-day period starts on the postmark date. The CARD Act did a lot to help consumers but this is an example of where they dropped the ball. The Sears situation you describe sounds like a mess. At least with the CARD Act, failing to notify cardholders of big rate increases isn’t allowed (except under specific circumstances, such as the cardholders being more than 60 days late).

  • Benjoh

    This is not right. The credit card companies have to wait 3 business days after the day they mail the notice to start the 14 days. It is at the receipt of the letter to the consumer. These banks and credit card issuers need to go back and read FTC Consumer Rules. This gives you 17 days + your normal 28 days billing cycle and this equals the 45 days. Yes, if they have to mail everyone the same notice that has the same credit score, not just one person. These statements and notices the banks send out with all these raise interest this and that are not new. Alot of times the banks raise the rates and forget to send out the statements, like Citi Sears did back in September, 2009. They were suppose to send these letters out in case someone wanted to opt out, but the letters was not sent out. But everyone who had that type of account, interest was 3 x as much as it was before and it caused alot of people to default on that card. Imagine paying, $129.00 a month and getting a statement for your minimum the next month at $387.00 which is as much as a car note and thhis is a credit card.

    • Tax Guy

      Under the UCC, (Uniform Commercial Code) which is a very large compilation of federal regulations, any item sent using the U.S.P.S. is considered received the date that it is mailed. This law has been in existence for as long as I can remember. This is exactly why the IRS regards tax returns as filed on time if it is postmarked on the due date. They must.

      Since I no little of the FTC Consumer rules, I can’t really dispute what you have stated, but, it may be possible for the FTC Consumer rules to supercede the UCC. However, the Card Act may very well supercede the FTC Consumer rules. In that case, we may be losing the 3 days.

      I can only give my personal opinion on the FTC Consumer rules and the Card Act.

      However, I am quite sure about the UCC rule. But just try and get a bank to comply with it. Good luck.

  • Dee Cohn

    If they do the retroactive higher percentage, then they should not get any more money ever. Your crdeit is already ruined, why hurt yourself and pay the high interest. Stop paying your credit card bills and buy things with cash instead. Let them call and scream. Until their is a debtors prison why not? Credit is not as important as it once was, many people have bad credit now at no fault of their own. Everyday people shouldn’t be punished for other’s mistakes in managing the country’s finances.

  • Michael

    My wife was diagnosed with cancer and had to stop worling immediatly and go through to major operations. That put her out of work for 8 f the last 12 months. She had purchased insurance on all her cards. We had no income and contacted card compinies immediatly about using the insurance. To this day they ruined her credit and all the request to insurance for the cards and the credit card compinies have been ignored. They are all crooks and get away with it.

  • Pingback: Business Credit Cards Trouble for Small Business | Oilfield Working Capital()

  • http://www.issamar.com Rabbi Issamar Ginzberg

    Great catch! That is one of those seemingly pro-consumer deals that has has an ugly reality… and the people least like to be able to afford the higher rate are the ones that will be hurt most.

    did anyone mention the fact that the bankruptcy reforms were pushed through just before the economy fell off a cliff?

    • Beverly Blair Harzog

      Thanks for your comment! Your so right. This hurts the people who needs help the most. The CARD Act was step in the right direction, no doubt. But failure to give consumers all the important details isn’t acceptable.


Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team