Posts Tagged ‘credit cards’

From Card Fees to Mortgages, a New Day for Consumers

Monday, June 28th, 2010

At last, it’s settled.

After months of haggling, the terms of financial reform are set, so long as both houses of Congress vote to accept them in the coming days.

While elected officials spent much of their time working out the details of regulating complex derivatives and grappling with whether banks ought to make big bets with their own money, they also set a number of new rules that will directly affect consumers.

Investors and those who advocate on their behalf did not get everything they wanted. Stock brokers and annuity peddlers are still not required to act in their customers’ best interest, for instance. But mortgage shoppers stand to gain under the new rules and millions of people will now have access to a free credit score.

Here is a roundup of some of the biggest consumer issues that members of Congress addressed and where they ended up:

CONSUMER BUREAU The bill would create an independent Consumer Financial Protection Bureau, housed within the Federal Reserve. The bureau is to be headed by a single director appointed by the president and confirmed by the Senate.

The new bureau would write and enforce rules for most banks, mortgage lenders, credit-card and private student loan companies. Smaller banks and credit unions, or those with less than $10 billion in assets, would have to obey the consumer bureau’s rules — but the smaller institutions’ enforcement and supervision would remain with their current regulators, said Travis Plunkett, legislative director for the Consumer Federation of America.

CREDIT SCORES While you still can’t get a free credit score each year with your three free credit reports, you will soon be able to see the score if it has hurt you in some way.

Let’s say a mortgage lender, credit card issuer, insurance company or landlord quotes you a more expensive interest rate or premium price or refuses to rent you an apartment because of problems with your credit score. If that happens, the company or individual would have to give you, for free, the score (probably a FICO score) that led to your troubles.

Keep in mind that nothing is stopping you from asking for the score, even if you like the rate or result of your application. You may be able to get it for free even if the lender, insurer or landlord is not legally required to give it to you.

MORTGAGES The bill offers a number of new protections, many of which are a bit like closing the barn door after all of the animals escaped. Lenders, for instance, will have to check borrowers’ income and assets. Most lenders have learned that lesson by now or have ceased to exist.

Other rules include a ban on prepayment penalties for people with adjustable rate and other more complex types of mortgages. Mortgage brokers and bank employees will no longer be able to earn bonuses based on the type of loan they put you in. That will presumably eliminate any incentive to push high-interest loans on borrowers (who might otherwise qualify for a better deal) to inflate bank profits.

Julia Gordon, senior policy counsel for the Center for Responsible Lending, said there will now be a cap limiting mortgage origination fees to 3 percent of the loan. There are exceptions for required upfront mortgage insurance premiums, say for a Federal Housing Administration loan, and for points that borrowers elect to pay to lower the mortgage interest rate.

CREDIT AND DEBIT CARDS Hate those merchants that won’t let you use your credit card unless you spend more than a certain amount? Well, now they have Congress’s blessing, as long as the minimum is not higher than $10. The Federal Reserve can increase the minimum if it chooses. As for maximums, only the federal government and colleges and universities can limit what people spend. So if you are paying tuition on a credit card and earning a couple of free plane tickets each year, that fun may soon end.

Merchants are also free to offer discounts to people who pay cash instead of using cards, or use debit instead of credit cards. They will not, however, be able to charge one price for people using American Express cards and a lower price for people using Visa and MasterCard credit cards.

Merchants will also not be allowed to give discounts based on which bank issued the debit or credit card you are using. Why would a merchant want to do that? Because the bill gives the Federal Reserve the ability to set a limit on the fees that stores must pay to accept debit cards. The catch here, though, is that only banks with more than $10 billion in assets would be subject to the cap. As a result, merchants may have to pay more to accept debit cards from smaller banks and credit unions than big banks like Bank of America and Chase. And if that were to happen, stores might be tempted to offer discounts to people with big bank debit cards.

Oddly, community bankers and credit unions don’t want to end up earning more money from merchant fees than big banks do, even though it would give them a competitive advantage. Why not? They worry that the big banks will immediately put pressure on Visa and MasterCard to lower merchant fees for all debit cards, not just the big banks’ cards. Thus, the smaller institutions had hoped that the status quo would remain, with everyone continuing to earn fat fees from the merchants forever.

It is not clear what the Fed will do or how the big banks and Visa and MasterCard will react. This could take a few years to play out, or many years if lawsuits start flying. Some merchants may try to play fast and loose with the rules too. Bill Hampel, chief economist of the Credit Union National Association, figures that small retailers might happily accept debit cards with the names of big banks that they recognize and then ask shoppers with cards from no-name institutions to use cash or some other card.

FIDUCIARY DUTY The Securities and Exchange Commission was given the authority to create a new rule for brokers that would require them to put their clients’ interests first. But that won’t happen right away. Consumer advocates wanted the so-called fiduciary standard in the new law, and it appeared in the House’s original proposal.

But ultimately, negotiators compromised and agreed to have the commission first conduct a six-month study of the brokerage industry, looking at, among other things, whether there are any regulatory gaps or overlaps in regulation of brokers and investment advisers. Advisers are already required to put their clients’ interests ahead of their own, while brokers must only recommend investments that are deemed “suitable,” based on factors like their clients’ financial goals and tolerance for risk. “It is now going to be incumbent on Chairman Shapiro to stay on top of this,” said Barbara Roper, director of investor protection at the Consumer Federation of America, “to ensure that this is an unbiased study and that any rules that are proposed are strong and really provide the full fiduciary duty that investors are entitled to.”

But there are no guarantees.

EQUITY INDEXED ANNUITIES These annuities are complex financial products that promise a minimum return on your investment. But they often require you to tie up your money for long periods of time and charge hefty surrender fees if you need to pull out your money early. Unscrupulous salesmen, who collect lucrative commissions, have used deceptive marketing techniques to sell these products to senior citizens, which is why sales of these annuities have been the subject of many lawsuits.

But a provision in the legislation will prevent the S.E.C. from regulating them, a step backward, consumer advocates and the commission have argued, from what is now the case. The S.E.C. had adopted a rule to regulate these annuities as securities, but it had not yet been enacted. Now, the annuities would be treated as insurance products, which means they would be overseen by state insurance regulators.

“That means no securities antifraud authority, no rules against excessive compensation, and no securities regulators to help police the market for these abuses,” Ms. Roper said. “And there are no guarantees that the people who sell them know any more about the securities markets these products are based on than the people who buy them.”

Consumer advocates also said the amendment language is broadly written, which could allow products similar to equity indexed annuities — or those that have characteristics of both investments and insurance — to skirt S.E.C. regulation as well.

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How the Credit CARD Act Will Affect Types of Credit Cards

Tuesday, April 6th, 2010

by Allie Johnson
Thursday, April 1, 2010

How will the CARD act affect you? That depends in part on which type of credit card you’ve got in your wallet.

The combined impact of the economic downturn and the restrictions placed on credit card companies by the Credit CARD Act mean card issuers will be changing how they do business in ways that will affect every credit card — but the impact will vary depending on the type.

“I think we’ll see a reverting back to the model of the 1980s — annual fees and higher interest rates,” says Dennis Moroney, research director for TowerGroup, a financial services industry research and consulting firm. “But in those days, everything was pretty plain vanilla — there will be much more creativity now.”

One by one for each of 10 types of cards, here’s how experts see the CARD Act’s impact:

Bad Credit Credit Cards

The CARD Act’s crackdown on extremely high fees will severely curtail the ability of issuers to offer so-called “fee harvesting” credit cards — cards with hefty upfront fees and extremely low credit limits — geared toward people with bad credit, experts say.

“I think the more reputable issuers, if they were issuing these cards in the past, are going to be much more reluctant to do so now,” Moroney says. Issuers that do market cards geared toward consumers in the subprime market will have to strike a balance between charging enough to cover the increased risk and following the new law, according to Ken Paterson, vice president, research operations/director credit advisory service for Mercator Advisory Group, a consumer payments industry research and consulting firm. One immediate impact was the introduction of high-rate cards to replace high-fee cards: One card issuer, First Premier, experimented with. To date, no one has followed its lead.

“One of the silver linings of the CARD Act is that it has built in more protections against some of the more egregious pricing that sometimes creeps into that market,” Paterson says. In the future, Moroney predicts customers with shaky credit will gravitate toward prepaid cards and secured cards.

Balance Transfer Cards

For most consumers, being able to get a balance transfer card that offers a 0 percent, 1 percent or 2 percent interest rate on a transferred balance for much more than a year will become a thing of the past.

“Teaser rates aren’t going to go away, but they’re probably not going to be as lucrative for the consumer as they were — you’re going to see a higher rate and a shorter introductory term,” says Jerry Straessle, president and CEO of JLS Associates, a consulting firm specializing in the credit and debit card industry. Even before the act’s passage, card issuers were retreatingn from one-year introductory periods and toward the minimum of six months mandated by the CARD Act. Expect introductory rates of 7 percent to 9 percent or higher, Straessle predicts.

“The CARD Act is going to have upward pressure on rates simply because the ability to adjust rates on outstanding balances is severely limited now,” Straessle says. Issuers “can’t do anything about accounts that have protected balances, so they will book new accounts at higher rates of interest to make up for lost revenue from penalty fees and penalty interest.”

However, there will always be issuers bucking the latest trend that make it worth shopping around. Citi, for example, just extended one of its 0 percent balance transfer card offers from a maximum of 12 months to a maxiumum of 15 months.

Business Cards

None of the provisions in the CARD Act apply to business credit cards. “So far, small business cards are unaffected by the Act — only consumer cards were included,” says Mercator’s Paterson. “But it wouldn’t surprise me if some of the improved disclosure that was legislated on the consumer side eventually found its way to the small business side too.”

Though business owners should keep personal and business expenses separate, Paterson says the increased protections on the consumer side might push very small business owners away from business cards. “I haven’t seen data evidence of this, but a one or two-person business — a freelance programmer, artist or Web designer — might say, ‘My personal card works just fine for business purposes. I don’t need a small business product.’”

Debit Cards

Debit cards have never been all that profitable for banks, but new rules on overdraft charges mean banks will make even less. Starting in July 2010, new customers will not be allowed to overdraft using their debit cards unless they opt in ahead of time. Overdraft fee income had been a big profit center for banks.

To help make up the lost revenue, many banks may start charging annual fees for debit cards, probably in the $20 to $30 range, Moroney says. Or, banks might charge for other services, such as financial planning or linking accounts to help customers avoid the embarrassment of having their card declined at a store, Robertson says.

Banks probably will get innovative; for example, providing more rewards debit cards and more hybrid credit/debit cards, as well as cards geared toward students who now cannot get credit cards because of the new law, experts say. Also, banks will reinforce responsible management of personal finances — maybe with more programs similar to Bank of America’s BAC Keep the Change, in which the bank automatically rounds up each check card purchase to the nearest dollar and transfers the difference to the cardholder’s savings account. “We’ll see more products that tap into consumer appeal,” Moroney says.

Gas Cards

The CARD Act will indirectly influence the most popular type of gas card — the co-branded card, which typically is issued by a bank in partnership with an oil company, and offers perks and rewards to the customer, experts say.

“If there’s a revolving feature, it’s going to be more expensive,” Straessle says, noting that there has been a lot of talk in the industry about controlling costs by paring down rewards. “If you get 5 cents in fuel credits per gallon of gas now, you can probably expect in the future it’s going to be a lesser amount — maybe a penny or two pennies less,” Straessle says.

Low Interest Cards

In the near future, interest rates on fixed rate low interest cards, as well as cards with low introductory rates, likely will go up several points, and issuers will be even more selective about who gets these cards, experts say.

“Low interest is a lot less desirable for most card companies because they don’t have the ability to change rates as readily as they did in the past” because of the CARD Act, says Beth Robertson, director of payments research for consulting firm Javelin Strategy & Research. “So low interest cards will be more for very valuable and very creditworthy transactors — people who carry high balances, pay regularly, have good credit scores and  have a high volume of transactions, probably more than $1,000 a month. Often someone in that category is someone who travels a lot on business and is purchasing airfare, hotel rooms and meals out, but it could also be someone who is especially wealthy and is spending money on higher-ticket items.”

Prepaid and Gift Cards

The Credit CARD Act imposes prepurchase disclosure of certain fees, such as inactivity fees, associated with prepaid cards — and mandates that the cards not expire before five years. The new rules for prepaid cards — including gift certificates, reloadable prepaid cards and gift cards — go into effect Aug. 22, 2010.

“In the past, some expired after a year — if you still had money on it, you lost it,” Straessle says. He predicts that, to make up for this lost revenue, issuers will start charging a higher upfront fee to get a prepaid card and also a higher fee to reload the card — as high as the market will bear. “It will depend what they think they can do competitively,” he says. “It’s the logical place for additional revenue to happen because there are not many revenue sources in a prepaid cards program.”

Reward Cards

Rewards card issuers already have started to move away from a mass-market mentality in which the goal is to create buzz around a rewards program and get as many people as possible to apply, according to John Bartold, vice president, Loyalty Solutions for Epsilon, a marketing services firm. “Issuers already have tightened up requirements for who gets into a loyalty or rewards program,” Bartold says. “The recession and the indirect impact of the CARD Act are making issuers look at these things a little differently and a little more smartly.”

Credit card companies have reams of data on their customers and probably will start using that data they’ve collected to target their customers in a more relevant way, Bartold says. “It’s not going to happen right away, but I think we’re going to start seeing cards more focused for certain types of lifestyles — where consumers can find a card that matches them rather than a generic spend-a-dollar, get-a-point,” Bartold says.

Card issuers might do that by creating a general program customers can tailor to their own preferences — similar to the Discover CardBuilder approach — or by creating a card targeted toward a specific group of consumers such as sports fans, eco-conscious consumers or music lovers. “For example, with music and entertainment, you could have a site where customers could download music, you could have a newsletter that reviews artists by genres, you could look at sponsoring a concert,” Bartold says.

Student Cards

The days of the big credit card issuers setting up tables on college campuses and offering free pizza to entice throngs of students to sign up for easy credit are over. The CARD Act prohibits that type of marketing and requires anyone under 21 to prove a source of income or have a parent co-sign to get a card.

“We probably will see fewer student cards out there because the CARD Act restricts a lot of it,” says Greg Meyer, community relations manager for Meriwest Credit Union in San Jose, Calif., who predicts more issuers will offer debit and prepaid cards geared toward teens and young adults.

New student cards probably will have higher interest rates and lower credit limits and will be treated more as a vehicle for building financial responsibility, according to TowerGroup’s Moroney. “They might offer little things that will reinforce responsible behavior,” he says. “‘You paid your bill on time this month, Bob or Sally — let us treat you to half off your next latte at Starbucks.’ Or, it could be a discount on textbooks. To a college kid, that’s a big deal. They could send the merchant promotions directly to a PDA with a bar code and the student could spend it immediately.”

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Credit cards for teens? Like, OMG

Wednesday, March 31st, 2010

Bonnie McCarthy
Mar 23rd 2010 at 1:30PM

Is it ever a good idea for a teenager to have a credit card? Some, like Dave Ramsey, say absolutely not … while others give a qualified yes. As a parent, who do you listen to?

My kids watch closely as I swipe the card through the magic slot at the register. In their short lives it’s something they’ve seen me do hundreds, thousands of times. Whether it’s debit or credit their eyes don’t differentiate, what they see is mom paying with the plastic card. Cool. They are itching to swipe it through the machine themselves. When we walk out of the store with our groceries or pet food,or whatever, it’s almost as though money has not changed hands. Painless, easy. A clean get-away, or so it seems since they are relatively unfamiliar with balances and bills.

The cards are ubiquitous, convenient, and sometimes insidious. As the famous ad goes, although there are some things that money can’t buy, for everything else….there’s plastic. Even the classic, children’s board games of Life and Monopoly now come in updated credit/debit card electronic versions instead of the old-fashioned, messy stacks of colorful paper money.

So it shouldn’t be shocking to discover that teenagers are becoming card carrying consumers in their own right — but it is. Technically, the legal age to get a credit card is 18, but parent’s can add kids to their accounts, obtain pre-paid cards, or sign up for “student” cards with low balance limits. The question is, should they?

According to a 2008 survey by the Jumpstart Coalition for Personal Finance Literacy given to 6,856 high school seniors in 40 states, credit card use is up 34.7%, compared with a 32.2% increase in 2002. The organization, devoted to promoting financial curriculum for kids in grades K-12 , also reported that ’08 seniors only answered 48.3% of the survey questions correctly, compared with ’02s seniors who got 52.4% correct.

What did they miss? Less than half understood that a card holder who only pays the minimum payment each month pays more in annual finance charges than a card holder who pays the balance in full.

A whopping 87% said they did not know the maximum amount they could be forced to pay under federal law if their credit card was stolen. Sounds like a teachable moment.

However, while some argue it’s best to teach kids how to use a credit card while still living under the family roof, not everyone agrees. Dave Ramsey, financial expert and host of the Dave Ramsey Show says getting a credit card for your teenager is actually, “an excellent way to teach him or her to be financially irresponsible.”

In fact, Ramsey told WalletPop, ” You are not teaching your 16-year-old child to spend responsibly when you give him a credit card. By giving a teenager a credit card, the parent, the one with the supposed credibility, introduces a financially harmful substance and endorses its use.” And copping a line from Nancy Reagan, Ramsey says, “Parents must instead teach the teenager to just say no.”

Sallie Mae’s 2008 report, How Undergraduate Students Use Credit Cards, asked students if they had ever discussed credit cards with their parents. Two-thirds, or 65% said they had frequently, or sometimes discussed the topic. One-third said they rarely, or never discussed the finer points of plastic. The students in the latter group were also the ones who said they were the most frequently “surprised” by their monthly statement.

The study indicated that more freshmen are arriving at school already in possession of at least one card, and on a national average, carrying four. Credit card vendors are now restricted in their advertising and promotions on college and high school campuses, but they are still present. Credit solicitation to students is also achieved through direct mail, email, in-store promotions and from friend or parent referrals.

Of course, with grown up perks come adult-sized pressures. Nearly half, 45%, of those surveyed by Sallie Mae reported “high levels of anxiety” about paying credit card bills, and one quarter, 24% of students said they feel “extremely anxious.”

In articles entitled, Help Your Teen Stay Debt Free in College and How to Talk To Your Teen About Money, Rochester, NY Bankruptcy Court Judge, Hon. John C. Ninfo wrote about two college-age teens who found themselves floundering with credit card debt. One was bailed out by his parents and went on to write a graduate paper on student credit card debt,. The second killed himself.

Ninfo also recounted the example of “Greg,” a 19-year-old college sophomore who racked up $7,500 in credit card debt through online gambling. Class president and son of a minister, Greg became so desperate he robbed a bank. Ramsey documented similar despair in his article, The Truth About Teens And Credit Cards, noting two Oklahoma teens who committed suicide with the bills lying on the bed beside them.

Could extreme outcomes such as these be avoided through better education and preparation? At a 2008 joint news conference for the Jumpstart Coalition and the Federal Reserve Board, chairman Ben Bernanke said, “Today, only eight states across the U.S. require personal finance before middle or high school graduation. I believe more states should consider making personal finance a a requirement for all students who seek a high school diploma. I am personally convinced that improving education is vital to the future of our economy and all its citizens.”

However, while schools wrestle with paying their own bills and worry about how to incorporate one more curriculum into an already crowded classroom, parents will have to find a way to have yet another “talk” with their teens. In fact, it’s practically the law. Last month, the Credit Card Act of 2009 now requires parents to co-sign on credit cards for children under 21. “If their name is on the credit card, then the parent has a vested interest in saying, ‘Hey, my name is on this. Don’t screw this up,’” says Mary Beth Pinto, a marketing professor and credit card researcher at Penn State, Erie. Or at least that’s what supporters hope.

“When parents were the co-obligors, the students incurred less debt,” Pinto reports from a 2001 Penn State study she co-authored on parental involvement in college student’s credit card accounts. “If the parents are the co-obligors, the tendency is the parents were sitting them down and doing the teaching. They were explaining how to use the cards.”

Still, Pinto believes parents should start the process much earlier. “Yes, there has to be teaching going on and it has to start when they’re younger. You’re not going to get rid of credit cards. They are here to stay. You have to have them. You can’t fight progress,” Pinto said in article by Connie Prater,Law May Force Parents, Children to Talk About Credit Cards.
“Learning to use them responsibly is the practical thing to do.”

Ramsey, however, disagrees. “Throwing teens into a pool of (credit) sharks is a sure way to guarantee a life-time of heartache,” he said. “Over 88% of graduating college seniors have credit-card debt before they even have a job. Teenagers must learn lean to work, save, spend, and give under a mature parent’s direction, so the child can avoid the messages that say a credit card equals prosperity.”

WalletPop asked him when he would advocate allowing some plastic in the purse. “It’s never a good idea for someone to get a credit card,” said Ramsey. “You can make online purchases and rent a car with a debit card. Of course, you must have money in your bank account before you can make a purchase with a debit card. But, paying for things with money is what you are supposed to do.”

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Credit-Card Traps You Still Need to Watch For

Wednesday, October 7th, 2009

by Aleksandra Todorova
Friday, May 22, 2009

It’s being touted as a big win for consumers — but the new credit card legislation that President Obama signed into law Friday hardly means that cardholders can start swiping that plastic worry-free.

In fact, as the new rules kick in (most will go into effect nine months after the president signs the bill, while others will kick in as early as 90 days afterward) and banks start curtailing the abusive practices this legislation reins in, other practices will likely emerge that can hurt consumers just as badly. “The pendulum may have swung in the wrong direction”, says Dennis Moroney, research director and senior analyst for TowerGroup, a research and advisory-services firm focused exclusively on the financial-services industry. “The banks now have to respond to these changes.”

You may not like that response. Whether you use your credit cards as a tool to rack up free rewards points or you carry debt that you’re hoping to repay one day, you should watch out for new fees, higher interest rates, less generous rewards and fewer promotional offers. Here’s what you need to know.
Watch Out for New Kinds of Fees

The new law prohibits over-limit fees (unless the cardholder agrees to allow transactions that exceed their limits). To make up for that lost revenue, banks will likely introduce other fees. “You will see a re-emergence of fees for all kinds of other services,” says Robert McKinley, founder of CardWeb.com, which provides industry research and analysis. Among the fees cardholders should watch out for: fees for rewards programs and possibly even fees for checking your balance, he says.

Also, expect annual fees to make a comeback, says Moroney. In the 1980s, annual fees were standard, but were dropped as competition among card issuers heated up. Moroney predicts that some issuers will slap annual fees on all their credit cards, while others will tie the fee to spending thresholds, so that only big spenders get a free ride.

What cardholders should do: To protect against unpleasant surprises, examine credit-card statements and change-in-terms letters carefully. For now, card issuers can change terms at any time with 15 days’ notice, but once the new law is in effect, they will have to give 45 days’ notice.

Prepare for Higher Rates

Universal default allows card issuers to hike rates if a cardholder’s credit score drops or if they make late payments on other accounts. Once the new legislation is in place, issuers will lose this powerful risk-management tool. Without the ability to hike rates if a cardholder’s perceived risk level rises, card issuers will just start charging higher rates across the board, says Moroney.

“We’re going back to the kind of marketplace we had in the 1980s,” McKinley says. “You’ll see interest rates go back to the 19% to 20% range for most people.” The average variable-rate credit card today charges a 10.79% APR, according to Bankrate.com.

What cardholders should do: To avoid higher interest charges, consumers who carry a balance will have to shop around for lower rates — perhaps in exchange for paying an annual fee, says Linda Sherry, a spokeswoman for Consumer Action, a nonprofit education and advocacy organization. Those who pay their balances in full each month shouldn’t be affected, she says. To compare credit-card interest rates on new-card offers, use sites like CreditCards.com, CardRatings.com or CardTrak.com.

The End of Grace Periods?

The new legislation requires card companies to give consumers at least 21 days to pay their bills. But it doesn’t require them to offer a grace period, which isn’t the same as the cardholder’s due date — though the two usually coincide, says Chi Chi Wu, staff attorney with the National Consumer Law Center. While the due date designates the day by which a payment must be received for the cardholder to avoid a late-payment fee, the grace period is the time during which the cardholder isn’t charged interest.

McKinley says card issuers may get rid of grace periods altogether, so that cardholders who pay their balances off each month will start paying interest immediately after making a purchase. “The industry has for many years wanted to get rid of the grace period on convenience users,” he says.

What consumers should do: The only way to avoid interest charges if this happens is to stop using credit cards altogether, says Wu.

Say Goodbye to 0% APR Promotions

Low or 0% introductory APR offers have been a boon to diligent card users who played the balance-transfer game. Banks were able to offer those deals thanks to the card users who made a late payment before the offer expired, triggering the bank’s penalty rate of 20% or more. Now that banks won’t be allowed to increase interest rates on existing balances — and all promotional offers have to last for at least six months — these promotions will likely disappear, McKinley says. At best, consumers with excellent credit may receive introductory rates in the 6% range.

What cardholders should do: If you have a low-APR offer right now, be on your best behavior: Send payments on time and don’t do anything to trigger a penalty rate such as exceeding your credit limit.

Rewards Programs Will Be Less Rewarding

Credit-card companies have already been scaling back on rewards programs. Once the new legislation kicks in and they feel the squeeze of lower revenue from penalty fees and interest charges, they’ll become even less generous. Spending thresholds will likely go up, Moroney says, so you’ll have to spend more to earn miles, points or cash back. Banks may also adopt more stringent rules, such as wiping out your rewards balance if you make a late payment.

What cardholders should do: If you’ve accumulated a sizable amount of miles, points or cash back and worry that your card may scale back its program, it may be smart to redeem your rewards now — while the free lunch is still available.

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