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Credit Card Changes: Five Ways to Protect Yourself

This year’s credit card reform laws will deliver consumers long-overdue protections from dubious industry practices. But don’t breathe a sigh of relief just yet. The credit card companies, already reeling from a year of record losses, will find new ways to make credit card users pay. Here’s what you need to know to take advantage of the upcoming credit card industry changes and how to avoid letting the industry take advantage of you!

What’s Changing About Credit Cards?

Beginning in February 2010, credit card companies can no longer raise the interest rate on an existing balance unless you are more than two months late with a payment. Also, cards can no longer apply your payments to balances with lower interest rates before higher interest rates (a common trick with 0% APR balance transfer offers). Finally, a credit card won’t be able to raise your interest rate if you miss a payment on another credit account.

Although this is all good news for consumers, the credit card industry isn’t just going to lie down take it. Card issuers are already raising interest rates (I have received rate increase notices from both Citi and Capital One), slashing customers’ credit lines or closing accounts, and retooling rewards programs. Until the new card laws go into effect this February, the card companies can still play dirty. But even after the new laws take place, you’ll want to be vigilant for other credit card tricks that will cost you. Here are some simple strategies to keep your credit card companies in check and your credit score healthy.

#1. Use Your Cards Regularly

Card issuers are already taking inactive credit card accounts and cutting credit lines or canceling the accounts altogether. What’s the big deal if you didn’t use the card anyway? For one, even though credit cards should always be a last resort—available credit does provide some peace of mind should emergencies arise. But that’s not all: A lower credit limit (or one less credit card) will negatively affect your credit score. The solution? Rotate the cards you use from month to month so you occasionally use every card you own.

#2. Keep Balances Small

You never want to max out your credit cards, but ideally, you don’t even want to carry a balance of more than 20% of your available credit (10% is even better). Not only will a high debt-to-limit ratio lower your credit score, it will also raise red flags with creditors when they review accounts for rate hikes, limit reductions, or cancellation.

#3. Don’t Be Late!

Paying a credit card even a day late is an expensive mistake. There’s the $39 late fee and the chance you’ll be charged a default interest rate of over 25% or 30% for six months, a year, or longer! Your credit score will also suffer. Although the new credit card laws will make it more difficult for credit card issuers to extort you for just one missed payment, there may still be costly consequences. Sign up for email alerts of upcoming payments or automatically debited monthly payments (just be sure your checking account will have to cash to cover it) and never risk making a late payment ever again.

#4 Be Proactive About Your Rate…and Your Rewards

Gone are the days when you could call almost any credit card company and get a lower interest rate simply by asking. Although this may still work if you have impeccable credit, nobody should wait around for their credit card companies to jack their interest rates. The bottom line: If a low rate is important to you (i.e., you sometimes carry a balance), find a card that has a really low rate. To find them, look to local banks and credit unions, where rates are as low as half of major banks’ credit cards. Most of these cards won’t offer rewards, but remember that earning 2% cash back while carrying a balance at 10%, 12% or 15% does not add up in your favor!

Never carry a balance? If you like to charge everything you buy, pay the card off monthly, and collect the rewards, you could care less about your interest rate. So keep a close eye on your mail and credit card statements to make sure your favorite card doesn’t start trimming back its rewards programs. If it does, don’t be afraid to shop around for a better deal.

#5. Watch Your Accounts

Credit card issuers are notorious for making small sneaky changes that all add up in their favor: rate hikes, hidden fees, rewards reductions, etc. Although, by law, they must notify you of these changes, they often do so with small pamphlets of fine print that arrive in envelopes that look like junk mail. If you even bother to open the envelope, you probably won’t read the thing anyway! This year more than ever, open those envelopes and read the contents! Know what’s happening with your credit cards so your card issuers cannot take advantage of you.

Published or updated on July 21, 2009

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


We invite readers to respond with questions or comments. Comments may be held for moderation and will be published according to our comment policy. Comments are the opinions of their authors; they do not represent the views or opinions of Money Under 30.

  1. Banderman says:

    Unfortunately, Obama’s plan is too little, too late. The credit card companies are furiously raising their interest rates and fees before the legislation kicks in. What is the point. Credit card companies are routinely raising interest rates for people with great credit history, great credit scores, and great stability to 14-16%. When this new legislation kicks in, the credit card companies will be grinning ear to ear; they have effectively beat the system before it ever had a chance to see the light of day. The best policy for young people is probably to keep credit card balances low, paying them off every month in full to avoid any interest rates. Keeping 5-7 credit cards is probably a bad choice as the ‘system’ is designed to catch consumers in the ‘middle’; a damned if you do, and damned if you don’t model. The Obama plan was too late, too little, and a political pandering gesture; at best.

  2. M.Wanzer says:

    I definitely think that credit card companies have a lot of shady tactics to get top dollar from their customers. At the same time I do feel like they also get a bad rap. Like you said in this article credit cards really arent bad if you pay them off at the end of each cycle. I think one problem is people get credit cards without propperly understanding how they work. While I know that there are a lot of people in credit card debt because of life events that just came up, such as bills or medical expenses; there are also a lot of people that are in debt because of over consumption and lack of restraint. While you can not help emergencies that can cause credit card debt, I do feel like over consumption can be helped, and I definitely think people need to read more sites like this and be propperly educated on credit card useage. Good Post, I defintely learned some things I did not know.

  3. I will hopefully be debt free in less then a year, and only then will I be elude the evil clutches of credit card companies. Great article on combating credit card companies.

    -Dan Malone-

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