Beware of surprises in credit-card notices

Washington Post

WASHINGTON — Clear out the holiday catalogs, the Christmas cards and the coupons, and your mailbox may look less than festive. Now that the credit-card industry is required to warn you about any changes they’re planning, you should be scrutinizing what you think is only junk mail.

When you open that mail, you may discover that your interest rates are rising or switching from fixed to variable. In addition, some card issuers are instituting higher balance-transfer fees and raising teaser rates — or eliminating them altogether. The warnings come courtesy of sweeping reforms required by a law enacted this spring that is being phased in over the next year.

“We would urge everyone to read that mail,” said Ellen Bloom, director of federal policy for the advocacy group Consumers Union. “Check twice.”

The new law puts strict limits on how and why issuers can raise interest rates and impose penalties. One of the first provisions took effect in August and required credit-card companies to notify customers 45 days before any rate increase and give them a chance to cancel the card and pay off the balance at the current rate.

The banking industry had warned lawmakers that the new regulations could result in rate increases because they restrict issuers’ ability to adjust rates for riskier customers.

For example, starting in February, the law will prohibit credit-card companies from increasing interest rates because a cardholder has missed payments on other accounts, a practice known as universal default.

Though that helps protect some consumers from what regulators say were excessively punitive measures, the industry said it also means that customers in good standing will see their rates rise.

In addition, some cards have reportedly raised annual fees for users who do not carry a balance.