Credit Card Accountability Act Leaves Room For Bank Shenanigans

Credit Card AccountabilityThe Credit Card Accountability and Disclosure Act of 2009 Act, signed last month, was supposed to drastically improve protections for consumers. While the new law eliminates some problems, banks are good at finding loopholes.

In the last couple of months, the banks that issue my credit cards have been sending me notices informing me of changes in their account terms.  I threw the first one away unread.  But I started saving the notices when I realized that Citibank, Bank of America, and my other issuers all seemed to be changing their terms at almost the same time.  Apparently, a lot of credit card issuers decided to change as much as they could before the new law became final.

The first change became evident after I renewed my subscription to an investment questionnaire service I use.  The service is based in Australia.  When I received the credit card bill that included the renewal charge (which was in US dollars), I noticed a fee for a “foreign transaction.” I’d never seen that kind of charge before except when I used my card overseas, so at first I thought my credit card number had been stolen again.  But then, remembering the changed terms of service, I pulled out my Citibank notification and there it was:  transactions processed overseas, even in US dollars, would be treated as foreign transactions and charged a 3% fee.  This fee might have been (barely) justifiable for an overseas transaction in a foreign currency, but it’s totally ridiculous for a transaction made in dollars.

The Act, parts of which won’t take effect for a year, addresses a number of outrageous card company practices.

Some card issuers charge you interest for the current month on the basis of the past two months’ balance.  If you paid a balance in full, then carried a balance over, the balance you already paid could actually be included in the finance charge calculation.  The act prohibits this practice (“double-cycle billing”).

Card companies can no longer issue interest rate increases that retroactively apply to balances held before the rate went up unless the cardholder is 60 days or more late in making payments.

Interest-rate increases and other changes in terms will require 45 days’ written notice instead of the current 15 days.

Monthly card statements will have to show how long it will take to pay off your balance if you only make minimum payments.

Card issuers will no longer be able to charge you a fee for making a payment online or by wire transfer unless doing so provides expedited service.

Card issuers have been complaining that the changes required by the act will cost them too much in lost revenue to keep their current business models.  Presumably, they’ll make use of all loopholes they can (like so-called foreign transaction fees).

Pay attention to any new notices that you receive about changes in credit card terms.  Increasing interest rates, new fees, and changes in reward programs are likely.  I’ve already gotten a notice indicating a change in the terms for one card’s reward program.  Depending on how your terms change, you may want to go in search of a card that suits your needs better.  Here are several web sites you can use to shop for a card: Ask Mr. Credit Card, CardTrak,, and

About the author

Thomas Fisher, CFP®

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