Creditors Scramble To Make Changes

In an effort to make changes before new federal regulations kick in, credit issuers are making a few last-minute changes of their own. Kelli Grant, Senior Consumer Reporter for SmartMoney.com, discusses the most common practices.

Most credit card changes are going to take place in February, though a few were already implemented in August and September. "Card issuers are really looking at their portfolio of cards and trying to figure out how they're going to profit once these changes go into place," says Grant. "They're putting some pretty nasty changes into effect now to hedge their bets against next year."

First, interest rates are going up, even for cardholders who pay on time. "We just had Citibank that sent out notifications to cardholders that their rates are going up to 29.9% - and these are accounts in good standing," says Grant. She advises monitoring any mail that comes from your issuer closely to keep tabs on changing rates. "The good news is that some of the parts that are already in place of this card act require the issuer to give you 45 days notice of a rate change," says Grant. This gives consumers time to shop around for cards with better rates.

Annual fees are also changing. Until recently, annual fees only applied to cards with outstanding benefits. Now, though, many issuers are applying annual fees to even the most basic cards. There are still a few out there that don't have fees, though, so crunch the numbers and figure out if it's more profitable for you to have a card with benefits or a card with no fees.

Variable rates are also costing consumers money. "The fixed rate card has pretty much disappeared," says Grant. "You're going to see a fixed portion from the bank and then also a variable portion - it's usually the fixed plus a prime rate. The prime rate is only going to go up." She advises finding a card with a low fixed portion to counteract the ever-rising prime rate.

Using credit cards overseas has also become pricier. While many cards used to charge a fee for transactions abroad, now many credit card companies are charging for transactions that take place with foreign companies. "Even if you're not necessarily going abroad but you're making a transaction with a foreign company, we've heard a lot of stories from people who [are] going on a cruise down the coast of California, but because the cruise line is based in another country, they're getting charged for that," says Grant. "The cruise lines have to reimberse them." Grant says that shopping around can pay off. For example, Capital One is one of the big issuers that currently doesn't charge a foreign exchange fee.

While all these last minute changes can add up to big bucks, Congress is pushing for the reform bill to kick in earlier. "We've had a few little hints that it might happen as early as December first, but that's still up in the air," says Grant. "Pay attention and shop around. Make sure you know what's going on with your credit card."

For more information on credit card reform, click here to visit www.SmartMoney.com.

By Erin Petrun