Although many politicians proclaimed the dawning of a new credit card era when President Obama recently signed the sweeping credit card reform law, some consumer advocates aren’t quite as enthusiastic. Barred from using some money-making tactics like “any time, any reason” rate increases and automatic over-limit fees, lenders are likely to come up with ways to fill the profit gap in the nine months before the law becomes effective. Some of those tactics may hit you in your wallet.
Under the new law, a card issuer’s right to raise interest rates on higher-risk card holders will be hamstrung. The response is likely to be across-the-board rate increases, say some credit industry observers. In you carry a balance, start shopping for a card lower rates at online sites like BankRate.com and CardTrak.com. You may have to trade that lower rate for an annual fee, a feature that may be making a comeback for all cardholders, along with additional fees for other services, like checking your credit card balance. Rewards programs may also shrink, making them less attractive, and you may have to spend more to qualify for them.
The potential change that could hit cardholders the hardest is the possible elimination of the grace period. Unlike the due date, which is when the cardholder has to pay the bill to avoid a late-payment charge, the grace period is the time during which the cardholder isn’t charged interest. Card companies can shorten the grace period or get rid of it entirely. If your card company decides to eliminate the grace period, you would start incurring interest charges the minute a purchase is posted to your account. Unfortunately, the only way to avoid these charges would be to stop using credit cards.