Why your credit card is about to cost you even more

Own a credit card?

Has your APR risen lately?

Just last week, I received a letter from American Express stating that my Blue Cash credit card would see a sizeable rate hike. It said:

Like all companies large and small, our pricing has to be responsive to the business and economic environment. As a result, we have found it necessary to increase rates and fees on some of our products. Below are the principal changes to your account:

• We are changing your APR on purchases from a fixed rate to a variable rate. (Prime Rate plus 11.99% = 15.24%)
• We are raising the APR on cash advances. (Prime Rate plus 21.99% = 25.24%)
• We are raising the APR on any balances that have a penalty rate. (Prime Rate plus 23.99% = 27.24%)
• We are increasing the late fee.

(Insult to injury, this was exactly one day after AmEx mailed me a previous letter stating that I was the victim of internal credit card fraud -- as in, perpetuated by an AmEx employee. But I digress.)

But American Express isn't the only one. Credit card issuers are rushing to raise rates in advance of this Thursday, when the first provisions of the Credit Card Accountability Responsibility and Disclosure Act (bill here), or CARD, will go into effect.

Other protections of this credit card "bill of rights" will begin in February 2010.

Here are seven changes to expect from the CARD act:

1. Starting this week, card issuers are required to give you more time to pay your bills, and now must mail bills 21 days in advance of the payment date, instead of the current 14 days. For customers, that means a sigh of relief. For issuers, that means less fees collected due to postal delays.
2. Starting this week, card issuers are now required to give you 45 days' notice when they plan to raise your rates. Currently, customers receive 15 days' advance notice. That's why we've all been subject to a flurry of snail mail from issuers in the last 10 days or so.
3. Starting February 2010, issuers will now be banned from marketing to students or anyone under age 21. Students or those under 21 years of age will be required to have a parent or guardian as a co-signer, unless they can provide proof that they have enough income to make payments.
4. Starting February 2010, an interest rate hike cannot be applied to existing balances. If you carry a balance with several different interest rates, your payment must now be credited to the portion of the balance with the highest APR.
5. Starting February 2010, customers must be offered the chance to opt-out of overlimit fees and instead have a transaction denied at the point of sale.
6. Starting February 2010, issuers will be banned from "double-cycle billing," in which an issuer uses your average daily balance from the previous and current billing cycle to assess your finance charges.
7. Finally, gift cards with expiration dates within five years will be prohibited, and limits will be stipulated on dormancy or inactive fees on such cards.

The bill will also prohibit universal default, the issuance of affinity cards to students and fees for payment method (online, mail, phone, etc.), among other things.

While the bill is a triumph for fair consumer practices, the reality is not all milk and cookies, and the backlash means you'll have to mind your finances even more carefully than before.

Nearly half of all Americans making only minimum monthly payments to their credit cards -- very lucrative for card issuers, so long as no one defaults. But default rates have jumped recently, and vary from 10 to 14 percent for each card issuer.

Defaults are losses for the credit card industry, and foremost as a (lucrative) business, credit card issuers are expected to make up those write-offs with the help of customers who pay their bill more faithfully.

Here's why your credit card is about to cost you even more:

1. Expect to see an increased APR, more fees or even a retreat into annual fees, just like the classic American Express charge card. About 20 percent of the industry currently charges annual fees, according to the Chicago Sun-Times.
2. That also means "fixed rate" cards are going the rate of the Dodo, becoming "variable rate" cards that aren't subject to advance notice of rate changes.
3. Customer rewards programs will be scaled back or cut completely, and it will be much more difficult to earn or redeem points or miles.
4. Balance transfers will see a rate hike, too, reducing a customer's ability to seek a better interest rate from another card.

Of course, all this can be mitigated by paying one's bill on time and in full.

SmartPlanet sister site MoneyWatch.com also has a wealth of information about the latest credit card changes and what to do about them:

• MoneyWatch Credit Card Consumer Guide
• Credit Cards: How to Get the Last Great Deals
• How to Beat Tougher Credit Card Terms
• Dirty Credit Card Secrets
• Credit Card Bill Of Rights Explained
• A Rollback of Credit Card Rate Hikes?

What's your smart take on the CARD act?

This post was originally published on Smartplanet.com