How the CARD Act affects you

Earlier this month, new credit card regulations went into effect that requires credit card companies to be more straightforward with new card offers. The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act prohibits credit card companies from increasing the interest rate on an existing balance unless the cardholder has missed two consecutive payments and made new regulations for applying late fees that are disproportionate to the original purchase. Alongside regulations that require clear billing policies, comes a restriction against using household income on a new card application.

Instead, credit card applicants must use their actual income. Previously, the sum of all income into the household could be used on any individual`s credit card application. This regulation is meant to protect individuals from being extended a larger credit limit then they can pay off with current income.

There is some concern that this will affect stay-at-home spouses and college students. In addition to limiting the credit limits of these individuals it could also make it more difficult for college students and recent grads to build credit. Typically students open credit cards and keep a low balance that they can pay off in order to build credit.

One thing anyone who does not have any personal income, such as a homemaker, can do is become the authorized user on the account of his or her spouse. A joint credit card account allows a second user to get a credit card in his or her name, access all credit card statements.

However, it is important to know that only the primary person on the account is legally response for paying the credit card bill. Unpaid bills affect the credit score of the primary cardholder only. In the case of a married couple, financial burdens are shared; however bear in mind that your credit scores remain independent.

The CARD Act also requires people under 21 to either apply for a student credit card or get an adult to co-signer to open a credit card. Similarly to the joint card described above. Co-signers will be financially responsible for any debts a student accrues. Student credit cards can be opened by an individual student and will begin to effect the student`s credit score directly however a student must have a monthly income or sufficient savings to cover the card`s monthly minimum.