How the CARD Act Changed My Relationship with Credit Cards

Written by Joe Taylor Jr.
Posted On: April 14, 2010

"You will pay off the balance shown on this statement in about 1,901 years."

That phrase on my bill wasn't some accountant's idea of a joke. It's a federally mandated notice designed to scare you straight into paying off your debt. Fortunately, I pay off a lot more on my cards each month than just the minimum. In fact, another mandated grid on my statement reminds me that if I pay about three times the minimum each month, I'll have cleared the debt on this card in three years, saving me thousands of dollars in interest.

This consumer statement is just one of the effects the Credit CARD Act has had on my household, and on the way my wife and I use our credit cards. President Obama signed the Act into law back in the spring of 2009, giving various federal agencies three deadlines to implement its new requirements. The credit card industry didn't wait for a written invitation from Congress before responding with a series of policy changes and accounting decisions that foreshadowed the new relationships Americans would soon have with their lenders.

Tracing the Credit CARD Act's Impact at My House
Our household first felt the impact of the Credit CARD Act when my wife's favorite card stopped working. We thought it was a fluke, since she was well under her credit line and had automated her monthly bill payment. Logging on to the bank's website offered no immediate explanation. Only days later did we get a notice that, due to a "challenging economy," the card issuer had pulled the plug on her account, as it had for thousands of accounts it had acquired in a recent merger.

Riding alongside the CARD Act's passage was a Federal Reserve request that most banks "recapitalize" by reducing the amount of credit issued to consumers while stockpiling more cash in their vaults. That explained why, after years of making on-time payments and never straying above her credit limit, my wife was unceremoniously stripped of her platinum card. On blogs and forums, borrowers reported similar stories--only theirs involved getting caught in the checkout line at the grocery store or being stuck at the gas station with empty tanks.

Like most Americans, my wife and I have changed a lot of our habits around credit cards. We had long ago learned not to carry large balances, but we're making extra efforts to pay down what's left from a recent move. We set aside more cash in our emergency fund, and tied our savings to a new bank account that earns more interest while allowing us ATM access to quick cash. We ditched the airline affinity card for one with no service fees. Most of all, we've reset our plans so we'll be debt free about 1,899 years sooner than if we just sent in those minimum payments.