Credit Card Changes To Take Effect

On Monday, the so-called Credit Card Bill of Rights goes into effect. No longer will banks be able to impose surprise interest rate hikes or mislead consumers about payment dates. But consumer advocates say banks and card issuers are already devising new ways to introduce fees and interest rate changes.

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New credit card rules go into effect this week, rules that will change the way credit card companies do business with you.

The changes are part of the Credit Card Act of 2009, also known as the Credit Card Bill of Rights. The new regulations ban banks from things like suddenly shifting the due date for payments, or imposing surprise interest-rate hikes.

NPR's Audie Cornish has more on the new rules and how they could affect you.

AUDIE CORNISH: The new law requires credit card companies to do a better job explaining when payments are due, and what the penalties will be if you only pay the minimum balance. Introductory rates have to last at least six months, and card issuers can't raise an interest rate in the first year after an account is opened.

But that doesn't do a lot of good for Karen Finn(ph) of Silver Spring, Maryland, who has had to put away the plastic after her interest rates spiked.

Ms.�KAREN FINN: I would say the reason I made sure I paid off my balance and don't use them anymore is because they increased the interest rates so - like, incredibly high. At one point, I think my one credit card was 29 percent interest, yeah.

(Soundbite of laughter)

Ms.�FINN: And I was like, that's just too much. So now, I just pay what I can afford.

CORNISH: But you haven't - got rid of your credit card.

Ms.�FINN: No.

CORNISH: Now, what's behind that?

Ms.�FINN: I guess there's still some fear with the economy that I might need that credit to get me through, you know, a couple months of down time from work.

CORNISH: Even at 29 percent?

(Soundbite of laughter)

Ms.�FINN: Hopefully not. Hopefully not.

CORNISH: More changes, good and bad, are on the way. According to the American Bankers Association, some issuers are trying to offer cards with simpler terms, or reward good behavior with rebates. But consumers can also expect more cards with annual fees or penalties for inactivity.

Nessa Feddis is the senior federal counsel for the group.

Ms.�NESSA FEDDIS (Senior Federal Counsel, American Bankers Association): We're in a period of transition, where there's going to be experimentation and innovation. Banks will see how consumers respond. At the end of the day, consumers are going to drive the credit card product.

CORNISH: Georgetown University law professor Adam Levitin says just because there's a new law, that doesn't mean people shouldn't be scrutinizing their credit contracts.

Professor�ADAM LEVITIN (Law, Georgetown University): The regulation said you can't do A, B and C. Well, that leaves the door open for doing X, Y and Z. So there's no question that every major card issuer has a team of lawyers and economists and psychologists who are working on this, trying to figure out where the sweet spots - for how they can shape their card pricing so that they're the most profitable.

CORNISH: Because while the law provides more transparency, it doesn't stop banks from adding new fees, and it doesn't cap interest rates.

Nick Bourke, of the Pew Charitable Trust's Safe Credit Card Project, says the new law will save consumers more than $10 billion a year. But it's not a silver bullet if you carry a monthly balance.

Mr.�NICK BOURKE (Manager, Pew Charitable Trust's Safe Credit Card Project): If you're one of those people, you need to realize that one of the things that the law does is, it requires issuers to apply your payments in a way that's more beneficial to you. But if you're somebody who's only making the minimum payment due, the law won't help you. You have to pay more than the minimum payment due in order to get the benefits that the law provides.

CORNISH: Bourke says consumer groups will get another shot at making the law stronger. This summer, the Federal Reserve is supposed to issue new rules limiting credit card penalty fees to quote, reasonable and proportional amounts. Those terms are still undefined, but the central bank is still taking public comments.

Audie Cornish, NPR News, the Capitol.

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