Congress passed and the President signed the Credit Card Accountability, Responsibility and Disclosure Act of 2009 that will provide significant new protections for credit card holders. The law provides more information and transparency to cardholders, restricts credit card issuers from imposing certain rate hikes and penalty fees, and from marketing credit cards to young people, and requires disclosure of expiration dates and hidden fees attached to gift cards and gift certificates. It also requires disclosure of credit card agreements on the internet, and oversight of marketing practices by federal agencies. The law takes effect nine months from its enactment on May 22, 2009. However, the provision for a 45-day notice before interest rate increases, takes effect in 90 days.

Protections From Interest Rate Changes

• Promotional rates on new cards cannot be increased for at least six months from when the account is open.

• Standard interest rates cannot be increased for at least one year from when the account is open.

• Cardholders must be given 45 days' notice before an increase in interest rates, fees, and finance charges. Interest rates based on an index, such as the federal Prime Rate, are not subject to this notice provision.

• If credit card issuers increase a cardholder's interest rate based on the cardholder's "risk," they must periodically review the cardholder's risk and decrease the rate if indicated by the review.

• Retroactive rate increases are prohibited unless the cardholder is at least 60 days behind in paying the bill. If a person does fall behind and the rate on past purchases is increased, lenders must restore the lower rate if the cardholder has paid monthly minimum payments on time for six months.

Protections When Paying Bills

• Card issuers must apply payments above the minimum monthly payment to the debt with the highest interest rate first or to all rates equally. For example, most credit cards have different interest rates for different uses such as cash advances vs. purchases.

• Credit card statements must be mailed 21 days before bills are due rather than the current 14, and provide full disclosure of payment due dates and applicable late payment penalties.

• Issuers are prohibited from setting early morning deadlines for credit card payments and setting due dates on weekends and holidays when mail is not delivered or the issuers don't accept payments.

• Issuers must disclose the period of time and total interest it would take to pay off the card balance if only minimum monthly payments were made.

Protections From Fees

• The Federal Reserve will determine "reasonable and proportional" penalty fees.

• Fees for automated phone or online payments are prohibited, except for expedited payments made through live operators.

• Consumers need to opt-in before making transactions over their credit limits if there is a fee for over-limit charges. This will prevent issuers from automatically authorizing over-limit transactions and charging fees for those authorizations without the cardholders' permission.

Protecting Young Card Holders

• Card issuers extending credit to a consumer under the age of 21 need to obtain an application that contains: the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt; or proof that the applicant has an independent means of repaying any credit extended.

• Increases in the credit limit on accounts in which a parent, legal guardian, spouse or other individual is jointly liable are prohibited unless the individual who is jointly liable approves the increase.

Gift Card Protections

• All credit card gift cards, store gift cards, and gift certificates would have at least a five-year life span, and issuers cannot charge any fees or decrease the value of the cards or certificates until there has been at least one year of no activity.

• Any service fees, inactivity charges, and expiration terms for gift cards or certificates must be clearly disclosed.