What Has Your Credit-Card Issuer Done for You Lately?

If your credit-card issuer hasn’t hiked your rates or changed your terms lately, consider yourself lucky.

The Federal Reserve’s quarterly survey of loan officers found that banks are continuing to tighten standards and increase rates before the Credit CARD Act takes effect in February 2010. In fact, all 400 credit cards issued by the 24 largest banks and credit unions still are using practices deemed unfair or deceptive by the Federal Reserve, according to the Pew Safe Credit Cards Project. Some of those practices have become more common since May when President Obama signed the Credit CARD Act, which will provide more consumer protection.

Once the law takes effect, card issuers won’t be able to raise your rate arbitrarily or increase your interest rate for a year after you open a new account. That’s why more than half the banks surveyed by the Federal Reserve have raised rates recently (or plan to). Banks also have been cutting credit limits, increasing fees and making it tougher for consumers to qualify for a credit card.

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So if you haven’t been reading the fine print on notices sent by your credit-card issuer lately, you might not realize that the terms on your card have changed. For those of you who have paid close attention to any changes and have grown frustrated with them, you might be in the market for a new card. So we asked Ken Lin, chief executive of free credit-report site Credit Karma, what consumers need to know about credit cards now. Here are ten things you should know.

1. Does the card charge an annual fee? Lin says most cards are bringing back this fee. In October, Bank of America announced it would start charging cardholders who pay in full each month an annual fee of $29 to $99 a year. Citigroup has started charging annual fees to cardholders who don't put more than a specific amount on their cards, typically $2,400 a year.

2. Has your rate increased? A study by the Pew Safe Credit Cards Project found that the lowest advertised credit-card rates increased by more than 20% from December 2008 to July 2009 while the highest advertised rates increased 13% during that time period. If you're looking for a lower-rate card, consider one from a credit union. Advertised rates were 20% lower at credit unions, according to the Pew study.

3. Is there a fee for not using the card regularly? You're not using your card and trying to pay down your debt, and what's your reward? A fee. Yes, some card companies are charging fees for not using your card regularly, even if you carry a balance.

4. Has your minimum payment changed? Card companies are changing minimum payment amounts with minimum notice. Chase, for example, hiked the minimum payment for cardholders with large balances from 2% to 5%. If pay only the minimum and have payments automatically deducted from your bank account each month, make sure you're paying the right amount.

5. Is your rewards card still rewarding? Several issuers now are charging fees for cardholders to redeem their rewards. Lin says the new legislation won't prohibit issuers from changing terms arbitrarily on rewards cards. Plus, rewards cards tend to charge higher interest rates. So if you carry a balance, this is not the card for you.

6. Has your credit-limit been cut? Analysts expect credit card companies to cut limits by $2 trillion by mid-2010. This isn't just happening to people who have fallen behind on payments or have low credit scores.

7. How are payments applied? Until the new law takes effect, card issuers don't have to apply your payments to your highest-rate balance. Many issuers now apply payments toward your lowest-rate balance.

8. Can you get approved for a new card? People with a credit score of 650 or lower will have a much tougher time getting a credit card. Lin recommends applying for a card from your bank or for a secured card. Secured cards require you to put down a deposit of $200 to $300. Watch out, though, for secured cards with exhorbitant fees. Orchard Bank's card has no hidden fees and a $35 annual fee that's waived the first year. Public Savings Bank has no annual fees on its secured card.

9. What's the right card for your credit score? If you have a low credit score, do not apply for a premium card. You will get turned down, and your credit score will drop even more because you made a credit inquiry, Lin says. Credit Karma lets you search for credit cards based on your credit score.

10. Should you transfer your balance if you're fed up with your card? Balance transfers aren't as much of a sweet deal that they used to be because card issuers are adding fees (or hiking them). For example, Chase now charges a 5% balance-transfer fee. Factor in these fees when considering balance-transfer offers.

See LowCards.com for a comprehensive list of changes major credit-card issuers have implemented recently.