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How to Make the CARD Act Work for you

Here are four ways consumers can take advantage of the CARD Act, which is finally fully in effect.

This week the final reform provisions of the Credit Card Accountability, Reform and Disclosure Act went into effect, making official the law President Barack Obama signed last year with hopes of holding credit card companies accountable to their customers. Here are four steps consumers can take to make the CARD Act work for them.

Don't be afraid to ask the credit card issuer to lower your APR:

While interest rates for home buyers continue to tumble, interest rates for credit cards are at their highest levels since 2001 due to credit card companies hiking rates in advance of the CARD Act implementation. The average annual percentage rate on new cards was 14.7% in the past quarter, compared with 13.1% a year earlier, according to the research firm



The CARD Act prohibits rate increases on existing balances

unless the consumers is 60 days delinquent in making a payment

. It does not restrict APR increases for future transactions, but under the final phase of the CARD Act issuers are required to evaluate these rate increases every six months. If a customer's credit history warrants a rate decrease, the company must reduce that rate within 45 days of completing the evaluation. And there's nothing preventing customers from requesting a rate decrease.

"If you know that you were late on a payment because you had lost your job, or because you had a major medical emergency, after three months you might call and plead your case," says Gail Cunningham, vice president of public relations at the National Foundation for Credit Counseling. "If you don't get the answer you want, ask to speak to a supervisor."

Consumers should keep in mind, though, that the issuers have the power to increase rates, too, so pestering the credit card companies with hundreds of calls is a bad idea.

Beware of small-business cards:

"A common misconception about the CARD Act is that it applies to all credit cards, including small-business credit cards, when it really only applies to general consumer credit cards," says Odysseas Papadimitriou, chief executive and founder of

Card Hub

, which aims to help customers find the best credit card rates. "Because small-business credit cards are not protected under the CARD Act from things like unexpected interest rate increases and extensive penalty fees the way that general consumer credit cards are, it is my recommendation that small-business credit cards are only used for transactions that you know you can pay back in full right away."

Small businesses using credit cards as a source of funding -- and therefore carrying a large balance -- are best off using a consumer credit card also or only, according to Papadimitriou. "The business owner is personally responsible for the debt incurred on the card whether it's a general consumer or small-business credit card, so they are not assuming any additional risk using a general consumer card for their business," he says.

Don't forget about your credit score:

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Consumers may be tempted to let payments slide for more than a month, knowing the CARD Act prohibits rate increases on existing balances unless the consumer is 60 days delinquent. Furthermore, the CARD Act caps late fees at $25 for first-time offenders and $35 for frequent offenders. Payments that are more than 30 days late will hurt a consumer's credit score, though. In fact, 35% of a credit score is based on whether the consumer makes payments on time.

"There's nothing good about paying late," says Cunningham, who recommends setting up an online alert system for payment reminders.

Stop the junk mail from credit card companies:

"D" is for "disclosure," and now that the CARD Act is in effect, credit card issuers must ramp up their notification policies -- including giving consumers 45-day notice of any significant changes to the terms of their accounts. Those notifications may get lost in the piles of unwanted mail from credit card companies, though. Consumers can stop much of this junk mail by visiting

. "It's a good idea to opt out of pre-screened offers of credit for a number of reasons," Papadimitriou says. "One is to go green and help the environment with less paper waste. Secondly, receiving credit card offers through the mail puts you at greater risk for identity theft, as someone could steal your mail and apply for a credit card on your behalf."

-- Written by Carmen Nobel in Boston.

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