New Credit Card Pitfalls

With the new credit card regulations in place card issuers have come up with more practices that are unfavorable for consumers. Kelli Grant, Senior Consumer Reporter for SmartMoney.com, tells us about five new tricks cardholders need to beware of.

More banks are implementing annual fees for card holders. Citibank notified some cardholders earlier this month that April 1st their accounts will be charged a $60 annual fee. Other issuers have also tacked on annual fees, which in the past were reserved for high-end rewards cards. Cards that carry a fee aren't a good deal for most consumers. If you can afford a short-term hit to your credit score, think about applying for a card with no fees and then close the old account.

Look out for hidden notifications. Under the new law, issuers are required to send you notification of any changes to your account terms at least 45 days in advance. But, advocates worry that they could mail the notice in an inconspicuous envelope or bundle it with the monthly statement so it remains unnoticed. Consider it another good reason to read all mail from your issuer very carefully.

Higher interchange fees may eventually result in higher prices for the consumer. Interchange fees are what issuers charge merchants every time someone pays with a credit card. Issuers could offset losses from the new regulations by increasing those fees. Already struggling merchants may pass those higher costs along to consumers in the form of increased prices.

Parents should be cautious when co-signing for your child's credit card. The new regulations prohibit credit cards for college students unless a parent co-signs or the student has proven they can pay the bill. But issuers have the option to keep co-signers on the hook for the cardholder's debts long after the student has turned 21. Parents should ask about their liability before signing.

Be aware of interest rate rebates. Issuers can't raise rates on existing balances, but they're working around that prohibition. Several issuers have jacked up rates as high as 30%, and offered some discount on that if you pay bills on time or make a certain number of new charges each month. Bottom line: it's more expensive than ever to carry a balance. Try to pay off the charges in full each month.

For more information on the new credit card regualtions and other consumer tips click, here.
Kelli Grant & Erika Wortham

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