The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 -- known in banking circles as just the Credit CARD Act -- changed the game for many consumer lenders. On the heels of 2008's Wall Street collapse and credit crunch, the new rules helped eliminate some of the industry's worst practices while forcing many of us to rethink our relationships with money.
The Act's regulations protect us from most kinds of predatory lending, while ensuring that borrowers can't easily overextend themselves. However, three popular types of cards don't fall under the Act's guidelines, and you're probably carrying at least one of them in your pocket:
Business credit cards
The Credit CARD Act and most other consumer protection guidelines don't apply to business lending. Therefore, many banks can offer small business credit cards and "professional" credit cards that look like their consumer counterparts but carry totally different terms and conditions. For instance, business credit cards can require a "personal guarantee" that ties your company's balance to your personal funds. Commercial collection agencies don't have to play by the same rules as conventional bill collectors, either. In fact, they can be downright nasty, without breaking any laws.
When your account doesn't carry a pre-set spending limit and requires you to pay your balance in full every month, you're likely carrying a charge card instead of a credit card. In many ways, charge cards offer advantages over many credit cards when used for corporate travel or short-term expenses. However, lenders can change terms and conditions with little notice, even imposing tough fees and canceling rewards points based on outside information.
Prepaid debit cards
We're still in the Wild West when using what regulators refer to as "general purpose reloadable cards." Unlike a debit card connected to a checking account, your prepaid card may not carry government protection against fraud, loss or theft. Regulations don't cap fees or set guidelines for merchant disputes. Although major players like American Express and Chase have helped legitimize the market by lowering fees and guaranteeing funds, it's still up to consumers to read the fine print very carefully before using prepaid cards.
Even though the Credit CARD Act brought comprehensive reform to a large portion of the personal lending market, consumers must remain vigilant about the terms and conditions tied to any debit, charge, or credit cards. Although our worst case scenarios may never come to pass, you can save yourself plenty of headaches by examining what might happen to your account if you lose your job, if you become the victim of identity theft, or if your card's bank goes out of business. Choose to do business only with companies that can adequately support you through any of those crises.