Credit Card Accountability, Responsibility, and Disclosure Act, Explained

Jason SteeleUpdated March 17, 2025

Share this article:

Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

The Credit Card Accountability, Responsibility, and Disclosure Act is typically referred to as the CARD Act of 2009. This federal law was designed to regulate the credit card industry and protect consumers against unfair practices. Here’s what you need to know about what the Credit Card Act of 2009 does and how it can help you.

What Is the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009?

The CARD Act is a federal statute that was signed into law by President Obama on May 22, 2009. It amends the Truth in Lending Act which dates back to 1968. The Credit Card Accountability, Responsibility, and Disclosure Act, as it’s more formally known, is a consumer protection law that prohibits unfair practices by credit card issuers and requires more transparency in credit card terms and conditions. It also adds limits to the charges and interest rates that credit card issuers are allowed to impose. The CARD Act also established guidelines to protect young consumers and those with limited credit history. For instance, it requires proof of income or a cosigner for applicants under 21 and mandates clear disclosure of interest rates and fees. Additionally, the law restricts excessive penalty fees and ensures that payments are applied to the highest interest balance first. By implementing these measures, the CARD Act has helped consumers make more informed financial decisions and avoid falling into debt traps.

Understanding the Credit Card Accountability, Responsibility, and Disclosure Act

More than a decade after the passage of the CARD Act, many consumers take its protections for granted when using a credit card. Understanding the differences between how credit cards worked before the law went into effect, and how credit cards work today can help give you a sense of the current credit card advantages.Recommended: How Do Credit Cards Work? Complete Guide

Why Was the Credit CARD Act Enacted?

Prior to the CARD Act, credit card terms could be different from those of any other type of loan. For example, a credit card issuer could arbitrarily raise interest rates without notice. They could also impose unlimited fees. Many lawmakers and consumers considered their practices unfair.

Key Provisions of the Credit Card Accountability, Responsibility, and Disclosure Act

The CARD Act provides protections against interest rate hikes, certain fees and billing practices, and marketing to underage consumers. These are all good things to know about when you’re choosing a credit card. Read on to learn about some of the most important protections the Credit Card Act provides.

Interest Hike Limits

Under the CARD Act, credit card issuers can no longer raise their rates on existing balances, other than times when the prime rate changes. Recommended: Average Credit Card Interest Rates

Fee Limitations

The CARD Act prohibits card issuers from approving charges that are over the cardholder’s credit limit and then imposing over-the-limit fees on them afterward. Late fees are also capped. And thanks to the Credit Card Act, subprime cards cannot charge account opening fees that are greater than 25% of the available credit limit.

No Double-Cycle Billing

Before the CARD Act, credit card issuers routinely charged interest based on the average daily balance of the previous two billing cycles. This meant that cardholders often paid interest on charges that had already been paid off. The CARD Act prohibited this practice. Now, interest must be based on the average daily balance of the previous billing cycle only.

New Rules for Underage Customers

Before the CARD Act, the credit card industry marketed their products to young adults and students on college campuses. Now, the CARD Act helps protect young people by prohibiting giveaways on college campuses that reward students for applying for a new credit card. Card issuers also can’t mail applications to those under 21 who haven’t opted in to receive them. Additionally, according to the law, credit card issuers cannot approve anyone under 21 for a new credit card unless they have an adult cosigner on the account or provide proof that they can pay for their charges. Recommended: Credit Card Terms, Explained

Shortcomings of the Credit Card Accountability Responsibility and Disclosure Act

While the CARD Act was a major advancement for credit card consumer protections, some critics say it still has shortcomings, such as:

No Maximum Interest Rate

The CARD Act did not create a maximum interest rate. As a result, there are still some credit cards that are marketed to people with poor credit that have interest rates of over 30% APR.

Card Issuers Can Still Raise APR

Although the CARD Act prevents credit card issuers from raising rates on existing debts that are being paid on-time, it does allow variable rates — which are rates that rise and fall with the prime rate. Today, nearly all credit cards offer variable rates, and fixed rates are rare. Recommended: What Is APR on a Credit Card?

No Protection for Small Business Cards

The CARD Act’s protections are for consumers. Small business credit cards were exempted from many of the protections offered by the law. However, today the terms of most small business credit cards voluntarily comply with the CARD Act.

Deferred Interests

There are still deferred interest credit cards that can charge retroactive interest if the balance isn’t paid in full by a certain time. These cards are commonly offered by retailers for purchases of big-ticket items like furniture.

Fee-harvester Cards

These are credit cards, typically aimed at people with bad credit, that typically charge high fees. According to the CARD Act, these fees cannot exceed 25% of the credit limit when the account is first opened. However, fee-harvester cards may be able to get around this by charging large fees later on.

How Payments Are Allocated

Credit card issuers used to apply payments to the lowest interest rate balances first. Now, they are required to apply them to the highest rate balances first. However, this only applies to payments made above the minimum payment required on the account. This means that if you pay the minimum amount shown on your statement, the card issuer can apply the minimum payment to the lowest rate balance.

How Does the CARD Act Affect the Use of Credit Cards?

By most accounts, the credit card industry has become fairer and more transparent than it was before the CARD Act. Consumers have more protections in place than they did before, and credit cards appear to be thriving: In 2024, the number of credit card users reached an all-time high, according to the credit bureau TransUnion®.Recommended: Can You Pay Bills With a Credit Card?

The Takeaway

The CARD Act of 2009 established important new protections for credit card holders, including limitations on fees and interest rate hikes, and helping to safeguard younger consumers. That said, the law does have some shortcomings. It’s a smart idea to understand the benefits and limitations of the CARD Act in order to know your rights as a credit card user. Choosing the right credit card also requires some research, and Lantern by SoFi can help make the process easier. With Lantern by SoFi’s online marketplace, you can compare multiple credit card offers all in one place without making any type of commitment.

Frequently Asked Questions

What protections are listed by the Credit CARD Act?

Does the CARD act allow minors to own credit cards?

How does the CARD act protect college students?

Photo credit: iStock/Georgii Boronin

LNTCC-Q125-009

About the Author

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.

Share this article: