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Credit card law has good and bad

Usually when my credit card bill comes in, I just check the balance and the due date.

With the January bill, however, I noticed that the interest rate had nearly doubled. We seldom use it and pay it off as soon as possible if not within the same billing cycle. I couldn't help but wonder why this had happened. We are good people.

Apparently the card company wanted to get its fingers in my wallet before the Federal Reserve's new Credit Card Accountability, Responsibility and Disclosure Act of 2009 took effect Monday.

Under that new law, companies cannot raise interest rates on existing balances for a year. Plus, they must be more open in disclosing the terms of their cards.

Sounds good doesn't it? Well, it is and it isn't.

"I didn't see anything harmful in the law," said Johnny Cantrell, chief operating officer of the non-profit Consumer Credit Counseling Services, a subsidiary of Apprisen Financial Advocates. "But I thought there would be a lot more to it, especially when I saw the size of it."

The law is more about the regulation of the process than about the consumer, he said. Still, there are some good things in the law.

"I just extract the positives to help the consumers we see," he said.

Those positives include a disclosure on the bill each month that details how long it will take for a cardholder to pay off a balance if making only minimum payments. It will also tell you how much you would need to pay each month to pay off your balance in three years.

"It's part of the language of transparency," Cantrell said. "It shows where you are headed."

Another positive is the tightening of restrictions for young adults or college students.

"They are not allowed to issue a credit card to anyone under age 21 without verification of employment or an adult co-signer," he said.

That should mean a decrease in the number of credit card companies on or near campuses enticing students with free gifts to sign up for cards. And, if the cardholder wants a limit increase, the co-signer must OK it.

But bear in mind, the card companies can, if they choose to, keep the co-signer on the hook even after the young person turns 21, or for decades later. If the co-signer is a parent, though, at least he or she can keep track of what's going on.

If a company decides to raise the interest rate, the cardholder must be given 45 days' notice, unless the payments are 60 days behind. If the user doesn't like the rate, he or she may decline it. The card will be closed and the person will have 60 months to pay it off at the existing interest rate.

That's a good thing, too.

Also, payments made by 5 p.m. on the due date are considered on time. The law requires companies to go by the postmarked date. And when due dates fall on holidays or weekends, payments received on the first day afterward are on time.

When I noticed my rate had increased, a move the company said it had warned of in November, I decided I was going to pay off the balance and close the account. I was fired up.

But Cantrell said that might not be the best thing to do.

Closing the card might decrease your credit score, he said. With the card closed, there is less money that the consumer has access to, he said. "It is better to keep them and not use them."

If you have multiple cards and really want to close a few, cancel the newest ones or the ones you've had for the shortest time.

Just don't relax, Cantrell said.

The credit card companies have complained they will be losing billions of dollars with this new law. Cantrell said that means we'll all be seeing creative pricing coming down the pike to keep profits high.

Many users have discovered new interest rates, like I did and as Cantrell did, or fees, and some will discover new credit restrictions.

It's all about profits, not people. At least now, for what it's worth, there is some oversight by the government.

"I don't know if consumers will ever be first," Cantrell said. "We think we will and then we snap back to reality. We have to be happy about what we got."

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