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Credit Cards

New Credit Rules: A Mixed Blessing

You'll see more disclosures on your bill but have a tougher time getting a store credit card.

I know that my bank can't raise my interest rate anymore if I pay my credit-card bill on time, even if I am late paying other bills. But can an issuer restrict use of my card in other ways?

Yes. Under the Credit Card Accountability Responsibility and Disclosure Act, if your credit report shows late payments, your card issuer could decide you have become a risky customer and cut your credit limit, impose an annual fee or raise your interest rate on future transactions. You must receive 45 days' notice of any such change.

What happens if I decide to opt out of a rate increase?

After you notify your credit-card issuer, you won't be able to use the card to make new purchases. You will have five years to pay off your account balance at the old rate, but you can't be required to make monthly payments that exceed twice the old minimum payment.

I bought a new refrigerator using my card last spring and was able to defer payments for 12 months. But if I don't pay off the balance by the end of the grace period, interest is applied retroactively to the purchase date. Here's my problem: If payments now go to the highest-rate balance, how can I pay off the 0% deferred balance?

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Don't worry. There's an exception to the highest-balance payment hierarchy. During the last two billing cycles before a deferred-payment period ends, all payments above the minimum must go toward paying off the deferred balance. So you could pay off the deferred balance in the final month and avoid interest charges.

My credit-card company used to insist that my payment arrive by 10 a.m. on the day that it was due and charged a fee if I didn't meet the deadline. Do the new rules offer any relief?

The CARD act imposes clear and simple payment rules. Payments are always due on the same day of the month and are considered to be on time if they are posted by 5 p.m. If the due date falls on a weekend or holiday and your payment isn't processed until the next business day, it is still considered on time. Your card issuer may not charge you a fee to pay by phone or electronic transfer unless you receive expedited service.

Can retailers still offer customers approval for a store credit card at checkout?

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The CARD act requires that issuers consider your ability to pay before extending credit. Previously, retailers could enter your name, address and Social Security number into the computer, get your credit score and decide whether you were creditworthy. It's unclear how the new system will work and how much financial information you will have to provide.

Does the CARD act apply to gift cards?

Yes, although the provisions that cover them do not go into effect until August. After that, gift cards will have to remain valid for five years. Inactivity fees will be forbidden unless the card has not been used for 12 months. You may not be charged a fee to replace an expired card, but you may still be charged a fee of $4 to $8 to purchase or activate a new card.

Will my monthly statement look different?

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Yes, it will show how much you're really paying in principal and interest if you make only the minimum payment, as well as how long it will take to pay off your entire balance at that rate. Plus, the statement must conspicuously display the payment due date, any late-payment fees and the late-payment penalty rate.