So the new credit card law...

[MadImmortalMan]

What the Credit Card Act Means for You
By JENNIFER SARANOW SCHULTZ

On Monday, banks had to start complying with many provisions of the Credit Card Accountability, Responsibility and Disclosure Act that are intended to protect consumers from unfair credit card billing practices.

Most of the new rules took effect on Monday, while some took effect six months ago. Below, we lay out the basics of what these new rules mean for you and provide links to resources for more information.

NOTIFICATION REQUIREMENTS: Card issuers generally must now give card holders 45-day notice of significant changes to the terms of their cards, including interest rate increases and changes to certain fees like annual or late fees. In addition, credit card companies must give you the option to cancel your card before such changes take effect. Your monthly credit card bill, which must be mailed now at least 21 days before payment is due and must now have a consistent due date month to month, must also now include information about how long it will take you to pay off your balance if you make only minimum payments and how much you would need to pay each month  to pay off your balance in three years.

This roundup from the Federal Reserve provides more details about new notification and billing requirements and other changes, and this Bankrate.com article offer tips for navigating loopholes in the notification requirements.

GRACE PERIOD ON INTEREST RATE INCREASES: For the first year after you open an account, your credit card company now cannot generally increase your interest rate. Even more, after the first 12 months, rate increases can apply only to new charges. See this link for exceptions to this rate increase grace period, including if your card has a variable interest rate tied to an index, if you are more than 60 days late paying your bill or if you signed up for a limited-time introductory rate.

Still, this provision means that you won't get an increase for late payments that are within 60 days of the due date or for late payments to other creditors. In addition, when balances have multiple interest rates, any payment above the minimum payment required must generally be applied to the balance with the highest interest rate. But, according to Bill Hardekopf of LowCards.com, there will probably be consequences of these changes, including a scarcity of fixed-rate credit cards as most issuers switch their fixed-rate cards to variable rates and the spread of higher minimum payments.

FALLING, AND RISING, FEES AND CHARGES: Thanks to the new changes, say goodbye to unwanted over-the-limit fees and many other common charges, though you should expect some rising fees as well. Under the new changes, if you make a transaction that would take you over your credit limit, your credit card company must turn it down unless you have told them to allow such transactions. This means that over-the-limit fees are likely to become a thing of the past unless you specifically tell your card issuer to allow over-the-limit transactions. In addition, if you do opt for over-the-limit transactions, you can be charged only one fee for them per billing cycle.

Among other changes, credit card companies can impose interest charges on balances only in the current billing cycle, fees like annual or application fees cannot total more than 25 percent of the initial credit limit and card companies cannot impose fees for the manner in which customers pay their bills. Upfront subprime card fees will also now be more limited, while foreign transaction fees won't be.

Still, industry watchers expect credit card companies to increase other fees to make up for lost revenue. Industry watchers at BillShrink, which provides a nice breakdown of the new rules here, and Lowcards.com are both noticing more cards with annual fees as well as increases in balance transfer, cash advance and inactivity fees. According to LowCards.com, which provides a good rundown of other unintended consequences of the act here, many issuers already raised advertised interest rates before Monday. In addition, rewards may now be harder to get or more expensive.

These possible fee increases mean that it's more important than ever that cardholders carefully monitor their credit card statements. "The days of tossing letters from your credit card company into the trash are over," Brad Stroh, chief executive of Bills.com, said in a statement.

STUDENT CARDS: To open a credit card account, people under the age of 21 will now need either a co-signer or evidence that they have enough income to make monthly payments. In addition, card companies can no longer market cards on college campuses. This Your Money column by my colleague Ron Lieber, "Credit Card Limits for Youth Can Be Opportunity for Parents," details the new rules as well as options for parents who want to help their college-age children build a good credit history. CardRatings.com has also put out consumer guides for navigating the new student card rules and other provisions taking effect.

And that's basically the intent.

Credit Card Fee Blitz Escalates

— By Andy Kroll
Fri Feb. 19, 2010 4:30 AM PST

On Monday, the second phase of the Credit Card Accountability Responsibility and Disclosure Act of 2009—a major overhaul that boosts safeguards against unfair interest-rate hikes, excessive penalties, and other predatory practices—goes into effect, so of course big banks are doing their best to shift the cost of these new changes onto consumers themselves through higher rates and tricky new fees. Among its many provisions, the Credit CARD Act, as it's called, will require credit card issuers to offer fair notice of changes in interest rates, ban universal default practices, and let consumers opt in to overdraft protection. The first phase of the CARD Act went into effect last fall; the third and final phase is slated for late August. Not to be outdone, though, banks are ensuring the burden of these new regulations don't fall on them.

Citigroup, for instance, recently sent letters to many of its Citi Card customers informing them of a new annual fee of $60. The only way to avoid that fee, the letter says, is to either spend more than $2,400 each year, after which the fee would be credited back to cardholders, or to pay off your debts and close the account. A Citigroup spokesman said the fee was "necessary given the increasing costs of doing business." The message, of course, is simple: Spend more money through the bank, which in turn increases the likelihood Citigroup will collect late fees and other charges, or take your business elsewhere. As one Citi Card holder told Mother Jones, "What they're doing is getting rid of prudent customers."

And that's just one example of what banks and credit card companies are up to in reaction to legislation like the Credit CARD Act. According to IndexCreditCards.com, a comprehensive site with data on credit card offerings, interest rates for consumers jumped by 0.42 percentage points in the past month, and the average rate offered to new customers, 16.7 percent, is the highest since 2005, with rates for both reward and non-reward cards continuing to climb. "We're clearly seeing one of the unintended consequences of the new law," IndexCreditCards.com founder Adam Jusko said in a statement. "We seem to be going from a marketplace in which a relatively few cardholders got into deep trouble to one in which the misery is more evenly spread."

What consumer advocates hope, however, is that the savings from the CARD Act will outweigh the banking industry's efforts to pass costs along to consumers. By cutting retroactive rate increases and "hair-trigger" penalty interest rates, the CARD Act could save consumers more than $10 billion a year, according to the Pew Charitable Trust's Safe Credit Cards Project. Pew also is pushing for an overhaul of late fees charged to cardholders, which the organization says are far too excessive right now. "We are seeing instances where Americans are being charged excessive penalties for exceeding their credit limits by even one dollar," Nick Bourke, the head of the Safe Credit Cards Project, said recently. "A $39 fee for exceeding a credit limit by just a few dollars, or for missing a $70 minimum payment deadline by a few hours, is difficult to justify as 'reasonable' or 'proportional' under the factors identified in the new law."

In late August, the Federal Reserve will issue a definition of what "reasonable and proportional" penalties for credit cards should be, which will be the third and final phase of the CARD Act. "We encourage regulators to implement strong rules that directly address disproportionate penalties," says Pew's Bourke.

And that's the effect? What have your card companies done to you recently?

I had a Citibank card with a credit line of over 30k and which I carried a balance on for a long time. I paid it off and after two months of not using it they closed the account for inactivity. lol

I should check and see if any of our interest rates have been jacked up. I don't currently have any credit card debt, but I bet if I still had some, they'd be screwing with me a lot more.

[derspiess]

I had a Citibank card with a credit line of over 30k and which I carried a balance on for a long time. I paid it off and after two months of not using it they closed the account for inactivity. lol

Whatever model they were running determined that your account was likely no longer profitable, so to save the cost of maintaining a zero balance account, they closed it.  They do these things by the tens/hundreds of thousands, so they know they're not going to make the right call 100% of the time.

[Caliga]

I have a Citibank platinum card with a high limit as well.  I've almost never carried a balance on it in the 11 years I've had it, but they did jack my APR up quite a bit sometime recently.  I only noticed this a couple of weeks ago when I was looking at my account--I got NO written notice that they intended to do it. 

[Grey Fox]

Wow, having a credit card before this must have been both a blessing & a giant pain in the ass.

[Ed Anger]

Wow, having a credit card before this must have been both a blessing & a giant pain in the ass.

Not really.

[Martinus]

I love how this essentially make a credit card a controlled good, like alcohol or tobacco. 

[Tonitrus]

I have three cards, only two of which I use regularly.  The third, I probably haven't used in nearly 4 years...they won't cancel the bloody thing(though they have modestly cut the limit on it).

I also never carry a balance that requires interest payments, and only use rebate cards.