New Credit Card Rules Could Bring Higher Fees

New credit card rules are taking effect this week - which for consumers, could be a mixed blessing.

On the one hand, the new rules require that credit card companies give you more advance warning before raising your interest rates - at least 45 days, up from 15 days previously. Also, they have to mail your bill to you at least 21 days before the due date, up from 14 days, giving you more time to pay and making it less likely you'll suffer late fees due to mail delays.

Those changes, which take effect Thursday, are just the first of a flurry of new consumer protections under the new Credit Card Accountability Responsibility and Disclosure Act (CARD), enacted earlier this year. Others, including a ban on interest rate hikes on existing balances and limits on credit card companies ability to charge over-limit fees, will take effect next year.

Rates, fees likely to increase

However, some analysts say not all is well and good. They point out, for example, that many companies are trying to get a jump on the new law by jacking up interest rates and fees already. In fact, if you've received any mailings from your credit card company in the past few weeks, better look it over carefully - it could contain some unpleasant surprises. If you've already thrown the letter out, access your account online and check for any recent notifications.

Be alert as well for any upcoming changes; it's recommended that, at least the next year, that you check your statement extra-carefully for any notifications of changes in your credit card terms. Of course, that's a good idea anyway, even though many often ignore it among the blitz of monthly paper that arrives in the mail.

Many expect that credit card companies will try to counter the new regulations with creative new rules of their own or, at least, try to make up for lost revenues. Higher interest rates are likely for many; you may also see your credit card issuer going to a variable interest rate program where the interest rate on your card fluctuates. You can also expect to see fewer rewards programs, as well as many cards that are currently no-fee may adding annual fees in the near future.

Even customers who regularly pay their balance in full every month could find themselves getting hit with unexpected fees, for such things as receiving paper statements, service calls that involve a live employee, balance transfers, cash advances and others.

Be alert for notifications from your issuer

Be alert as well for reduced credit limits. A lower-than-expected limit could put you at risk of an overcharge if you make a major purchase following a reduction. In addition, a lower credit limit on a card where you've been carrying a balance could have a negative effect on your credit score, if the reduction means you're using up most of your available credit on that one card. Better to spread it around several cards or, better yet, pay it off.

Despite the changes, expects say the best way to avoid getting burned by new fees and interest rates is still the same old advice - avoid carrying a monthly balance on your card. Pay off your balance each month, if possible, and if you can't do that, put yourself on a schedule to pay it off in the near future. For most credit card holders, paying twice the monthly minimum, assuming no new charges, should enable them to pay off their balance in 2 ½ years - and you'll be amazed at how much more financial freedom you have once you're no longer dragging that debt around.