New Credit-Card Rules Take Effect Soon

I understand that some of the provisions of the new credit-card law will go into effect this month. Which rules are they, and what changes have credit-card companies been making since the law was signed?

The Credit Card Accountability, Responsibility and Disclosure Act of 2009, which President Obama signed on May 22, will limit credit-card issuers' ability to raise rates, require them to provide better disclosure of their rules and fees, and eliminate some misleading practices. Most of the provisions don't take effect until February 22, 2010. A few, however, become effective on August 20: Card issuers must give 45 days' notice before increasing your annual percentage rate or changing any significant terms of the credit agreement (15 days is the current standard), and issuers must mail statements to you at least 21 days before the payment is due.

These new disclosure requirements are timely because card companies are in the midst of making some big changes in anticipation of the new law. So it's particularly important to review any letters your card company sends.

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Since the law passed, several card companies have been increasing fees, reducing credit limits, raising rates, boosting minimum payments and dropping customers with high balances, says Adam Levin, chairman and co-founder of Credit.com.

And they've also been altering their balance-transfer offers. One provision that will take effect on February 22 specifies that card companies must apply any payment you make above the minimum to your highest-rate balance first - so people who have a 0% balance transfer and an 11.99% rate on new purchases will no longer be stuck paying off the 0% balance while interest on the balance at 11.99% continues to accrue. See A Better Deal on Balance Transfers for more information about how these rules have changed.

But card companies are taking some of the shine away from balance-transfer offers. Some that had been offering fee-free balance transfers started to charge a 3% fee with a cap of $50 to $75, then they eliminated the cap and charged the fee on the entire transfer - resulting in a $240 charge on an $8,000 transfer, for example, says Bill Hardekopf, chief executive of LowCards.com. Soon after the new credit-card law was passed, Bank of America boosted its balance-transfer fee to 4%, and Chase increased its fee to 5% on some of its cards, he says.

Hardekopf also found that 0% balance-transfer offers are becoming harder to find -- especially if you don't have an excellent credit score -- and the period that rate is available is shrinking from 12 months to six. Meanwhile, some card companies are offering 2.5% to 3.5% rates for transfers, instead of charging 0%.

Because of these changes, it's important to review the rules and fees and calculate your potential savings before making a move. A balance-transfer offer that looked good in the past may not be worthwhile if you have to pay a high fee - even if the new credit-card laws make it easier to take advantage of the lower rate.

See Fewer Traps for Cardholders for more information about the new law, and The New Rules of Credit Cards for strategies to help you get the best deal from your cards.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.