If you follow the national news, you might have heard about something called the Credit Card Accountability, Responsibility, and Disclosure Act (or CARD Act) of 2009. Even though you may not have a credit card just yet, you should be aware of how this new law could affect you.

Why was change needed?

For quite a while, there has been concern about several credit card practices that people have found confusing. Lawmakers wanted to be sure consumers have a fair chance both to access credit and to repay the amounts they owe. Their solution, the Credit CARD Act of 2009, is a series of amendments to the Truth in Lending Act, which was first passed in 1968.

What are the benefits for you?

The Credit CARD Act focuses on clearer communication to consumers, simpler billing and payment practices, and more consistency in the industry regarding rate increases. These are some of the changes that have gone into effect:

• Restrictions on rate increases. Except for introductory rates, there can't be any rate changes for the first 12 months an account is open. After that time frame, the credit card company must give you 45 days notice before making any rate increases. In addition, Annual Percentage Rates (APRs) can be increased on existing credit card balances only if your minimum payment is 60 or more days late.
• New rules for payment allocation. If you have credit card balances with different interest rates, any amount paid over the minimum payment will be applied first to balances with the highest interest rates. This way, you can pay down your balance quicker by paying more than the minimum payment.
• Overlimit fee opt-in. Unless you agree ("opt in") to allow charges to go over your credit limit, companies will not be able to charge overlimit fees. This could save you money in fees, but be aware that if you're too close to your credit limit and you attempt to use your card to make a purchase, your card may be denied.
• More consistent payment due dates. Payments will be due the same day every month, and you will have more time to pay - at least 21 days from the time your statement is mailed until the minimum payment is due.
• More information on your statement. You will be able to see how long it would take to pay off your balance - and the total cost to you (including interest) - if you paid only the minimum payment each month. You'll also get notices about late fees or penalty rates (if they apply), and a toll-free phone number where you can get information about credit counseling, if you need it.
• Easier access to your credit card agreement. Credit card issuers will post samples of credit card agreements online. If you need to refer to your own credit card agreement, you will be able to request it online, and a copy will be mailed to you. Make sure that you refer to your own credit card agreement when verifying terms of your account.
• Provisions specific to students and young adults. In addition, the new law also states that anyone under age 21 must prove that they have the independent means to repay the debt or have a guarantor/co-applicant in order to be approved to get a credit card. And credit card companies are now prohibited from offering free items in association with credit card applications if the offer is made on or near a school campus or at an event sponsored by a school.

Is there a downside?

These new regulations are designed to improve many aspects of the credit card experience. But they also limit the ability of credit card issuers to manage risk through pricing. So, people with good credit may have to pay more for the credit they have. And people with a poor credit history may find it much more difficult to get credit.

Ideally, this law will make it easier for you to understand your credit terms and manage your debt, while still allowing reasonable profits for credit card companies. If that happens, consumers, credit card companies and the economy will all benefit.

Is there anything I need to do?

These changes have gone into effect, so, if you have a credit card, it is important you read all communications from your credit card company. Since these companies are required to notify you every time a change occurs, you may receive several mailings from the same credit card company.

Also, make sure you review your statements carefully to make sure they reflect any changes the company has stated in any notices mailed to you.

And remember that paying on time and keeping balances at a reasonable level is still the best thing you can do to establish and maintain good credit.