Smarthome & Theater Systems News and Events

How does the CARD act impact me? How does CARD act affect consumer financing
In May 2009, President Obama signed the Credit Card Accountability Responsibility and Disclosure Act of
2009, sweeping credit card reform legislation that marks the most significant changes in industry
history. This new law will change card practices and business models, reshaping the way consumers
have access to and use their credit cards.

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Changes in Interest Rates

Changes in Fees

Changes in Disclosure

Credit Availability for Students

Since credit card companies will be prohibited from issuing cards to customers under 21 without a cosigner
or proof of ability to repay, credit for students will be drastically limited. This will inconvenience
millions of young adults who use their cards responsibly, while making it take longer for many to build
up a credit history that is necessary later in life.

Changes for Young Adults

As the industry works to enact these changes, it is important to understand the full scope of the modifications and the effect they will have on consumers. While consumers will benefit from improved transparency, there are also some unintended consequences that affect the availability and cost of credit. For example:

Annual Fees Will Be More Commonplace, Limiting Perks

Customers will likely see annual fees become more common, while reward programs such as airline
miles or cash back rewards may be limited. Also, since promotional offers will both be paid back
differently and be required to last at least six months, cardholders will see fewer offers with
introductory low interest rates.

Limiting Credit, Lower Limits

With this new one-size-fits-all approach, card limits will be lowered since lenders will be limited in
managing risk going forward. Even customers that have a good credit score or have never missed a
payment will likely see less credit available to them.

Higher Interest Rates for All

The new legislation restricts the ability of credit card companies to price based on the individual risk of
the customer. As a result, the system becomes a one-size-fits-all model, meaning that interest rates will
likely increase for nearly everyone, including those with a good credit history, as those who successfully
manage their credit will be subsidizing those who have not.

Limiting Customer Flexibility

Many customers may also have less flexibility in how and for what they can use cards (e.g. limits will be
lower for many, so credit cards can't be used for large purchases or unexpected medical and other
expenses) and have fewer options in how they repay.

Smarthome & Theater Systems works primarily in the state of Connecticut.  We cover the entire state from the greenwich, darien, westport, fairfield area up north to farmington, west hartford, glastonbury area and up the shoreline to branford, guilford, madison and clinton.  We have traveled as far as the litchfield hills, marlborough and near the casino at montville.

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Posted on: 2010/02/12 12:04:35am
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