The CARD Act sets rules that credit card companies must follow when they charge you interest, raise your rate, or change your terms
The Credit Card Accountability Responsibility and Disclosure Act — known as the CARD Act — became law in 2009. It rewrote the rules for how credit card companies can charge you, what they must tell you, and when they can change the terms of your account. Before this law, card companies could raise your interest rate without warning, charge fees that weren't clearly disclosed, or explore payments in ways that cost you more money. The CARD Act stopped most of those practices.
This guide explains what the law actually requires, what protections you have right now, and what you still need to watch for on your own. The law doesn't make credit cards free or risk-free — it just makes the rules clearer and gives you more control over what happens to your account.
Key Takeaways
- Credit card companies must give you 45 days' notice before raising your interest rate or making other major changes to your account terms.
- Your payment must go toward your highest-interest balance first, not the lowest, so you pay less in interest overall.
- Late fees and over-limit fees are capped at reasonable amounts, and companies cannot charge them unless you're actually late or over your limit.
- Card companies must send your bill at least 21 days before your payment is due, giving you time to pay without a rush.
- Introductory rates must last at least six months, and companies cannot raise your rate during that period unless you miss a payment by 60 days or more.
How the CARD Act changed when companies can raise your rate
Before 2009, a credit card company could raise your interest rate whenever it wanted, for almost any reason — even if you paid on time. They could also explore that new rate to the balance you already owed. The CARD Act stopped both practices.
Now, a card company must give you 45 days' written notice before raising your rate or making any other major change to your account. That notice must explain the reason for the change and tell you that you have the right to close the account and pay off the old balance at the old rate. If you don't want the new terms, you can reject them — you just have to close the card and pay what you owe under the old agreement.
There are a few exceptions. If you have an introductory rate, the company can raise it when the intro period ends — but they must tell you that in the original agreement, and the intro period must last at least six months. If you miss a payment by 60 days or more, they can raise your rate when ready without the 45-day notice. And if you have a variable rate tied to an index (like the prime rate), the rate can change when the index changes, though the company still must notify you.
How your payment is applied and why it matters
Before the CARD Act, some card companies used a trick called "two-cycle billing." If you carried a balance on your card, they would calculate interest based on your balance from two months ago, not just the current month. This meant you paid interest even in months when you paid your full statement balance. The CARD Act banned this practice.
The law also requires that any payment you make above the minimum must go toward your highest-interest balance first. This sounds obvious, but it wasn't always the rule. If you had a 0% promotional balance and a regular 18% balance, some companies would explore your extra payment to the 0% balance first, letting the 18% balance grow. Now they must explore it to the 18% balance, saving you money in interest.
Your minimum payment itself is also regulated. The company must calculate it in a way that lets you pay off your balance in a reasonable time — not just cover the interest and fees while your principal stays the same.
Fees that the CARD Act limits or bans
Credit card fees were often hidden or unreasonably high before 2009. The CARD Act put limits on several types of fees and banned others entirely.
Late fees must be reasonable and proportional to the actual cost of your late payment. The company cannot charge you a late fee unless you're actually late — meaning your payment was due and you didn't make it. They also cannot charge you a late fee that's higher than the minimum payment you missed. In practice, most late fees now range from $25 to $40 for a first offense.
Over-limit fees are now optional. The company can charge you a fee only if you go over your credit limit and you've asked them to allow it. If you haven't given permission, they cannot charge you a fee for going over the limit — they can just decline the transaction instead.
Inactivity fees are banned. A company cannot charge you a fee straightforward because you haven't used the card for a while.
Annual fees are still allowed, but the company must disclose them clearly before you open the account. Some cards have no annual fee; others charge $95 or more. That's a choice you make when you pick the card.
What the CARD Act requires in your billing statement and notices
The CARD Act requires credit card companies to send you a bill at least 21 days before your payment is due. This gives you time to receive it, review it, and pay without rushing. The bill must clearly show your balance, your minimum payment, your interest rate, and the date your payment is due.
Your statement must also show how long it will take to pay off your balance if you only make the minimum payment, and how much interest you'll pay. This number is often shocking — it's meant to be. The company must also show you how much you'd need to pay each month to pay off the balance in three years, and how much interest that would cost. This gives you a real comparison between minimum payments and faster payoff.
If your interest rate changes, the company must tell you why. If you have a promotional rate, the notice must explain when it ends and what your rate will be after that.
Protections for young adults and students
The CARD Act added specific rules for people under 21. Card companies cannot issue a credit card to anyone under 21 unless they have a cosigner (usually a parent) or they can show proof of income. This was meant to prevent young people from taking on debt they couldn't manage.
If you're a student, you may see offers for student credit cards. These cards often have lower credit limits and higher interest rates than cards for people with established credit. They're designed for people building credit for the first time. Read the terms carefully — the interest rate and fees matter more than the credit limit.
What the CARD Act does not protect you from
The CARD Act is strong, but it doesn't cover everything. Interest rates themselves are not capped — a company can still charge 25% or higher if your credit is poor. The law just requires them to tell you what the rate is before you open the account and to give you notice before they raise it.
The CARD Act also doesn't protect you from making a bad choice. If you open a card with a high interest rate or high annual fee, that's still your decision. The law makes sure you know what you're signing up for, but it doesn't stop you from signing up.
Balance transfer fees, cash advance fees, and foreign transaction fees are all still allowed. These fees can be significant — a balance transfer might cost 3% to 5% of the amount you transfer. Read the fine print before you use these features.
Finally, the CARD Act doesn't change how credit card companies report you to the credit bureaus. If you miss a payment, it will still show up on your credit report and hurt your score, even if the company can't charge you a late fee.
How to use this information when you're choosing or using a card
When you're looking at a credit card offer, use what the CARD Act requires companies to disclose. Ask for the Schumer Box — that's the table that shows your interest rate, annual fee, late fee, and other key terms. Every card offer must have one. Compare the Schumer Box across cards you're considering, not just the marketing language.
Once you have a card, read your statement carefully. Check that your payment was applied to your highest-interest balance. Verify that your interest rate matches what you were told. If the company raises your rate, you have 45 days to decide whether to accept it or close the account.
Keep your payments on time. The CARD Act protects you from surprise rate increases, but only if you're not 60 days late. A single late payment can trigger a penalty rate, and it will stay on your credit report for seven years.
Frequently Asked Questions
Can a credit card company raise my rate without warning?
No. They must give you 45 days' written notice before raising your rate or changing other major terms. The notice must explain why and tell you that you can close the account and pay off the old balance at the old rate. The only exception is if you're 60 days late on a payment.
What happens if a credit card company charges me a fee I think is illegal?
Contact the company first and ask them to explain the fee. If they won't remove it and you believe it violates the CARD Act, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) at consumerfinance.gov. The CFPB investigates complaints about credit card companies.
Does the CARD Act cap how high my interest rate can be?
No. The law doesn't set a maximum interest rate. A company can charge 25%, 30%, or higher if your credit is poor. The CARD Act just requires them to tell you the rate upfront and give you notice before they raise it.
Can a credit card company charge me a fee for not using my card?
No. Inactivity fees are banned under the CARD Act. A company cannot charge you straightforward because you haven't used the card. They can still charge an annual fee if the card has one, but that fee is disclosed before you open the account.
If I reject a rate increase, what happens to my account?
You can close the card and pay off your balance under the old rate and terms. You won't be able to use the card anymore, but you won't owe the new rate. You'll have a set time to pay off the balance — usually several years — at the original interest rate.