More Changes for Credit Card Customers

Big changes are coming for credit card customers.

Later this month, the remaining provisions of the "Credit Card Accountability, Responsibility and Disclosure Act of 2009" go into effect. The changes are intended to protect customers.

The Early Show's financial contributor, Ray Martin, stopped by Monday to explain some of these changes.

Some of the changes took effect last year, but a whole other set of provisions will be enacted later this month.

"February 22nd is the magic date," Martin explained. "According to the card act, these changes will limit how and when banks can change your existing interest rates and fees. It requires that the extra amounts you pay must be credited to the portion of your balance with the highest interest rate and requires them to send your bills at least three weeks in advance of when they're due."

One of the things that have driven consumers crazy are "over-the-limit" fees. What happens with over-the-limit fees?

"Unless you give your credit card company advanced authorization and permission, they can now no longer charge you an over-the-limit fee, a fee that applied if you used your credit card and it went over the credit limit on the card," Martin said. "The drawback is, if you go to use your card, many banks say 'The charge will take you over the limit, the charge will be declined.' So what they're going to do is roll out optional overdraft protection. You have to opt in and agree if you do that."

Martin also explained how payments are supposed to be applied to your account.

"Here's how it breaks down. Say you have a credit card with two balances. One is a promotional interest rate at five percent. And the other portion of your balance from a cash advance is 20 percent interest rate. Say your minimum payment is $50, but you choose to pay $150, $100 more than the minimum. Now that extra $100 is required to be credited toward and pay off the balance with the highest interest rate first, the 20 percent, which means you'll get out of debt faster. Before that, any amount you paid the lowest interest rate first and you never get out of debt. That's a good change," he told co-anchor Harry Smith.

There are other restrictions on the card companies.

"They can no longer change your interest rate on your existing balances unless you're really late on the payment. A few days late, they can't change your interest rate. If you're more than 60 days late, they could change it. But they can change your interest rate on future charges, but they have to send you notice 45 days in advance," Martin said.

"We like the billing thing. That three weeks in advance. On the other hand so many are provisions that will help the consumer. Surely the banks and credit card companies are saying we have to figure out how to squeeze money out of these guys," Smith remarked.

"Here's the cynic in me. This will put pressure on credit card companies' ability to make a profit and they'll have to dream up new fees and charges. And the new laws don't restrict them from doing this. As a matter of fact, this is already happening. You're seeing credit card companies come up with annual fees on more cards. You're seeing credit card companies come up with a new fee called an "inactivity fee." If you don't use it enough and you want to keep it, we'll have to charge you an inactivity fee here. You ask 'What do you do?'" Martin said.

"Three things. First, read the mail. Credit card companies are required to send you notices, not necessarily in your statement, about the changes forthcoming. Read that stuff," Martin said.

"The second thing, read your statement carefully. Especially if you're making extra payments. You want to make sure the payments are credited properly. Computer programs might not be set up, they might have a glitch," he said.

Finally, Martin said third thing is to monitor your balance carefully, especially if you're close to your balance limit.