Credit Herald

The overhaul of the credit card industry is being hailed as a triumph for long-abused consumers. But before you start banking on falling rates or vanishing fees, you may want to read the fine print.

Q. What practices are still allowed?

A. The bill doesn’t cap interest rates, as some lawmakers had hoped. Although lenders generally can no longer raise rates on current balances — at least until payments are late— they can still raise them going forward.

That’s true even for people who already saw rates climb recently. The bill doesn’t shield from further increases in coming months — or ever.

Q. What if I always pay my bills on time?

A. There will probably be higher fees and interest rates across the board to make up for lost profit.

Card issuers have already started in the past few months raising fees for services such as balance transfers and cash advances. The trend is likely to continue. Card issuers also might start charging higher rates at the outset, when a customer gets a new card.

Getting approved for a new card will probably be harder, too — even for those with a solid credit history. And if approved, the card will probably come with a lower limit than in the past.

Q. What can I expect?

A. Be on the lookout for any letters from your credit card company. They could be notifications about rate or fee increases as card issuers prepare to get into compliance with the new bill.

Q. So what specific practices DOES the bill ban?

A. Card issuers will no longer be able to raise rates on current balances unless a payment is 60 days late; at that point, there’s no cap. If the cardholder pays the minimum on time, the lender is required to restore the lower rate after six months. Among other restrictions:

— Consumers will have to get 45 days’ notice and an explanation before their interest rate could be increased payday advance lenders.

— If a company uses "risk-based pricing" to raise rates on riskier borrowers, they must use that same methodology to lower rates when appropriate.

— The Fed will determine in coming months what constitutes "reasonable and proportional" penalty fees. This might include a cap on the dollar amount card issuers could charge for penalties such as late fees.

— Issuers can charge for over-the-phone payments only if you speak with an operator. Charges won’t be allowed for automated phone or online payments.

— You will have to opt in to go over your credit limit, which can trigger a fee as high as $40. Issuers will also be limited to charging three over-the-limit charges for a single infraction.

— Those 21 and under will need to show an independent source of income to get a card. Otherwise, they will need a co-signer.

Q. How will communications with my issuer change?

A. For starters, you may be getting your bills sooner; companies need to send statements at least 21 days before payments are due.

Cardholders will also be able to clearly see how much it’s costing them to borrow. For instance, bills will come with little boxes stating how much cardholders have paid in interest and fees year-to-date.

Statements will also spell out how long it will take to pay off a balance if only a minimum payment is made. And companies will need to include a toll-free number cardholders can call for credit counseling and debt management services.

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