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Credit & Debt

Fewer Traps for Cardholders

Arbitrary penalties are history, but watch for higher fees.

Opponents of the recently passed Credit CARD Act of 2009 have predicted dire consequences for borrowers. But if you pay your bills on time and have good credit, you should still qualify for a card. You may have to pay an annual fee to get a rewards card, however. Banks are already getting stingy with their rewards programs, cutting back on cash rebates and making it more difficult to earn free plane tickets.

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Among the key provisions in the law, which goes into effect in February 2010: Two egregious practices -- universal default and double-cycle billing --are banned. If you are having trouble, say, paying your mortgage, your credit-card issuer can’t raise your rate if you’re making your card payments on time. And you won’t be charged interest on a balance you have already paid.

Card issuers may not raise your rate arbitrarily, and your interest rate will not increase for a year after you open a new account. (Introductory teaser rates must last at least six months.) Plus, your issuer must provide 45 days’ notice if it is raising fees or interest rates, instead of the current 15-day standard.

Issuers may not slap you with a penalty interest rate unless your payment is at least 60 days overdue.

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Issuers must apply your payment to your highest-rate balance. That means that if you have a balance-transfer rate of 0% and a purchase rate of 11.99%, your payment will go toward the balance with the fee.

If you are under 21, you’ll need a parent or someone over 21 to cosign your credit-card application, or you’ll have to provide proof that you have income to obtain a credit card.

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