Applying for a credit card usually involves a host of personal information you may not want to hand over to just any credit card company.  You would want to be absolutely sure a particular credit card is right for you before filling out the application.  Unfortunately, even with the enactment of the Credit CARD Act in February 2010, information about the credit card is still fairly vague.  

The Credit Card Act was passed to create a set of guidelines for the credit card issuers.  This piece of legislations includes certain restrictions that prohibit credit card companies to increase the interest rates on existing accounts.  What the Credit Card Act fails to do is impose regulatory measures which would clarify credit card terms and conditions on credit card applications.  A recent CardHub.com Penalty APR Study rated 6 of the top 10 issuers poorly on the clarity of their credit card applications.  Most of them listed vague or misleading information in their terms and conditions.  What is more startling is that the Sample Statement issued by the Federal Reserve’s Consumer’s Guide was just as vague.

What many of the applications leave out is a clear explanation on how the interest rate of a credit card can be increased.  Information on how to reduce your interest rate and consumer’s protection from interest rate increases in the first 12 months of their account is also missing.

There are two fundamental rules of the Credit CARD Act that you should understand even though they may not be clearly written on your credit card applications.  These rules apply to all credit card issuers.  

Primarily, the Credit CARD Act disallows any interest rate increase on your existing balance, unless you are at least 60 days late in making a minimum payment.  In addition, your increased interest rate must be reduced to its initial percentage after six successive months of payments which are on time.

Secondly, the Credit CARD Act requires credit card companies to send you written notice of any rate increase 45 days in advance.  This higher rate can only be applied to transactions made 14 days after they have sent the notice.  This will give you plenty of time to context the increases or not use the card.  All previous balances must be based on the initial lower rate.

Without changes in the current format of the credit card companies’ disclosures, trying to comprehend their fine print is fairly pointless.  Just understand that the Credit CARD Act protects you from interest rate increases through the two methods listed above.