NEWS

4 ways for credit card users to avoid new financial traps

Wynne Everett

New credit card rules took effect in February that will make it harder for your card company to hit you with some fees and rate hikes. The new rules in the Credit Card Accountability and Disclosure Act require credit card companies to give 45 day notice before they increase an interest rate, late fee or annual fee. Also, companies can’t issue cards to most people younger than 21 without a co-signer and now have to show you on each monthly statement how long it will take you to pay off the balance making only the minimum payments.

Because most experts and credit card companies expect these new rules to cut into their profits, credit card customers should look out for the ways companies will seek to recoup those losses. Personal finance experts Adam Jusko of indexcreditcards.com and Jeffrey Strain of savingadvice.com have these tips for credit card users:

1 Be prepared for an annual fee Even cards that didn’t charge a fee will probably charge one now. You can shop around for a new card with no annual fee, but they will be tougher to find. “If you have good credit and you have used your card responsibly, you should still be able to qualify,” Jusko said.

2 Pay on time Late fees also are likely to go up, but you as the consumer have control over whether you get hit with this fee. You can set up automatic payment to make sure you’re always on time.

3 Get more than one card This sounds counterintuitive, Jusko admits. “But this way, if something goes wrong with your primary card or you get in a bind, you have a fall-back position,” he said. “It creates a little safety net for you.”

4 Don’t get sucked into a rewards card that’s not so rewarding Cards that offer rewards almost always have higher interest rates and the rewards programs will likely offer fewer airline miles and less cash back than they did in years past. “The first and foremost thing to remember is that if a consumer is not paying off the credit card in full each month, then the rewards are meaningless,” Strain said. “You are paying far too much for what little you get back in rewards and you would be much better off looking for a credit card with a low interest rate and no rewards.”

NEW REGULATIONS

- Your monthly statements now show how long it will take you to pay off your balance if you only make the minimum payment.

- Companies must send you your statement at least 21 days before payment is due.

- Companies can’t set the deadline for paying any earlier than 5 p.m. on the due date.

- Card companies can’t issue a card to someone under 21 unless he or she gets a co-signer or can show an ability to pay.

- With some exceptions, credit card companies can’t increase your interest rate for the first year your account is open.

- If your company does raise the interest rate, that new higher rate applies only to new purchases, not your existing balance.