Credit card reforms coming next year

Changes in credit cards coming in Feb. Planning on getting a credit card before industry reforms kick in next February?

Consider using the guidelines in Bankrate.com's credit card study released Monday.

In May, Bankrate studied the small print of 20 platinum and rewards cards issued by 10 credit card companies.

The issuers are American Express Co., Bank of America Corp., Capital One Financial Corp., JP Morgan Chase & Co., Citibank N.A., Discover Bank, First National Bank of Omaha, USAA Federal Savings Bank, U.S. Bank and Wells Fargo.

Bankrate.com picked through the companies' terms and conditions and extracted fees and costs.

A rule for choosing a card: "Look for the ones that charge the lowest fees," said Ellen Cannon, managing editor at Bankrate.com.

The best card is issued by USAA Federal Savings, the study found. It has the fewest fees and will not let cardholders exceed their credit limit, then slap them with an over-limit fee.

The message from this study is cardholders should open every piece of mail from their credit card issuer and read it to be sure their rates and terms have not changed for the worse, Cannon said.

Card issuers are scrambling to make money before the Credit Card Accountability, Responsibility and Disclosure Act (for short, the Credit Card Act) goes into effect because many industry practices will be illegal afterward, she said.

Key data from the Bankrate.com study:

• Late fee range: $20.70-$38.50.

• Average over-limit fee: $32.

• Average balance transfer fee: 3 percent, no cap on the fee amount.

• Phone payment fee if you interact with a human: $10-$15.

• Grace periods --the time before interest starts to accrue: 20-25 days.

• Zero-percent introductory rate on purchases: Lasts six-12 months.

• Default interest rate after another creditor raises your rate: 11-29.99 percent, possibly higher.

• All 10 issuers apply payments to the lowest interest rate balance first.

• All raise your rate if you violate any part of the card agreement. Some forgive once or twice.

An issuer may tout in the small print that it doesn't practice universal default. That is, it won't raise your rate after another creditor raises your rate.

But it also may state that it can raise rates if market conditions change, "which means any time," Cannon said.

"That's sneaky."

The credit card act, effective Feb. 22, 2010, won't slap caps on issuers' rates and fees. But, it will usher in consumer-friendly changes, such as:

• No more universal default. Except under certain circumstances -- for example, if a cardholder is 60 days or more late on a bill -- card companies won't be able to raise rates on existing balances.

• Consumers will get their statements at least 21 days before the due date, instead of 14 days, giving them longer to pay before late fees kick in.

• Issuers can't charge over-limit fees unless the cardholder agrees to over-limit transactions.

• Annual percentage rates can't be changed for the first year after a card account is opened, unless the person pays late by 60 days or more.

Issuers must apply payments to the highest-rate balance first.

Contact Iris Taylor at (804) 649-6349 or .