The Credit Card Accountability, Responsibility and Disclosure Act went into full effect on August 22; aimed toward restoring American confidence in the credit card industry. Under the new legislation, consumers are protected against issuer tactics, such as hiking interest rates and fees.
Credit card companies can no longer charge penalty fees to members for more than the debt is worth. Issuers must now re-evaluate rate increases every six months as well. The Washington Post reports that while these aspects of the CARD Act may help restore consumer confidence, they may slow the economic recovery process even further.
As the unemployment rate across the country remains high, the Post says that issuers are finding themselves in the black. Americans are paying down their credit card debt, but they are using their savings to do so. Consumer spending accounts for 70 percent of economic growth. As Americans attempt to regain their trust in credit, they will take more time to build up cash before using plastic again.
Debt can result in credit score damage. Consumers should attempt to make monthly payments in a timely manner to avoid tarnishing their payment history.