What the New Credit Card Rules Mean for You

Consumers need to navigate the darker side of credit card reform.

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The new credit card rules, the last of which went into effect earlier this week, have been celebrated as a victory for consumers. In many ways, they do offer protections: The CARD Act prohibits companies from increasing interest rates for one year after the card is first issued. If lenders raise rates later, they must tell customers why, and provide warning at least 45 days in advance. Lenders can no longer charge fees for inactivity on cards, and they face more restrictions when charging late fees and over-the-limit fees.

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But there’s also a darker side to the credit card reform. Because credit card companies are losing revenues from certain fees and interest rate hikes, they are making up for it by raising expenses in other areas, such as annual fees. Consumers with poor credit scores might find it difficult to take out credit altogether. And anyone who carries a balance might be paying more each month, because overall, interest rates have gone up, especially for people with less-than-stellar credit histories.

Here are six more facts you need to know about how the credit card reform bill will affect you:

1) Annual fees are going up.

Because card issuers are looking to make up lost revenue, they are tacking on annual fees to some cards or boosting the fees of cards that already had fees. Pew Charitable Trusts reports that the median annual fee for bank-issued credit cards went up by 18 percent between July 2009 and March 2010, from $50 to $59. (They ranged from $29 to $450.) Even customers who pay off their balance each month pay annual fees, so all consumers will need to be on the lookout for increases in this area, and consider switching cards if the fee goes up. Pew also reports that cash advance fees have been rising, as well.

[Visit the U.S. News Personal Finance site for more insight and money management tips.]

2) Interest rates have also been climbing.

The average credit card rate on consumer cards is now almost 17 percent, according to IndexCreditCards.com, which tracks trends in the industry. That’s one and one-half points higher than a year ago. IndexCreditCards.com attributes the increase to the CARD Act as well as rising consumer default rates. It also reports that more cards have switched from fixed rates to variable rates, which means they could go up even more later. Consumers need to be watching for such increases so they can switch cards if they can get a better deal elsewhere.

3) Finding a good credit card could take more effort.

With credit card issuers reporting that the regulations mean they will need to restrict credit access to potentially risky borrowers, the days of easy credit are behind us, at least for now. That’s why you haven’t seen as many credit card offers in your mailbox lately. You can still search for the best deals for you on comparison websites such as creditcards.com or cardratings.com, but expect to put more effort into your search.

4) Many card issuers are offering services that make it easier to manage your budget.

Wells Fargo, Discover, and Chase Blueprint are among the cards that now come with useful tools to help customers manage their spending, such as spending analysis reports and goal monitoring. In the past, customers went to outside sites such as www.mint.com for such services, but now, they are built into many accounts, as banks recognize the importance of online personal finance tools. While the CARD Act didn’t cause this change directly, it helped boost overall awareness among consumers, who now demand better service from their card issuers.

[See 10 Personal Finance Tools You Should Use Now.]

5) The details of how your card works are easier to find.

Card companies are now required to include an easy-to-read table on each bill statement that explains the balance, payment due date, minimum amount due, and applicable late fees. The CARD Act also requires companies to explain how long it would take to pay off the balance through minimum payments only, as well as how much a customer would need to pay every month in order to pay off the entire balance in three years. Card agreements and other disclosures must be posted online, as well.

6) Unused cards could get cancelled.

If you only use your card in emergencies, then beware: Issuers are more likely to cancel cards that go unused for long periods. That’s because inactivity fees are now prohibited, so issuers might decide that it costs them too much money to maintain unused cards.

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