Consumers and banks prepare for new credit card provisions

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New rules on credit cards are poised to take effect next month. The rules begin Feb. 22 as part of the “Credit Card Accountability and Disclosure Act.”

Congress has ordered banks to make interest terms more predictable and manageable.

There are a number of provisions, but one of the most significant is that payments will be applied to balances with the highest interest rate. Also, card companies won't be able to hike rates on most existing balances.

That said, Nessa Feddis, a vice president for the American Bankers Association (ABA), says future rates may be higher than consumers are used to. She says the days of the 0-percent balance transfer may be gone, interest rates will be a bit higher across the board for everybody, it'll be more difficult for consumers and small businesses to get credit cards and the limits will be lower.

The ABA represents large banks affected by the new rules. Feddis says the new regulations will also limit the types of fees banks can charge people who pay late or go over their limits. But, the dollar amounts on those fees are still up in the air. She says she’s seeing banks experiment with other sources of income and other features, and see how consumers respond. But Feddis adds there may be pressure on annual fees, and balance transfer fees. Consumers may find some of the rewards are less generous.

The February rules will also prohibit card companies from marketing on campus to college students, and anyone under the age of 21 will either have to have a co-signer or prove they have the means to pay off the debt.

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