Credit cardholders, listen up: On Monday, new federal regulations will take effect, changing the relationship between you and your card issuer.

The changes are part of the Credit Card Act of 2009, signed into law last May. Congress approved the legislation to end what consumer groups have called unfair and deceptive business practices. But critics say the heavier regulations will make credit cards more costly for everyone.

The primary focus of the law is to eliminate unexpected fees and interest-rate hikes. Many consumers had complained to lawmakers and regulators about credit card issuers retroactively imposing interest-rate hikes on existing balances. In other words, a customer would borrow money under one set of terms — only to get an ugly surprise when the bank suddenly pushed up the interest rate.

Studies estimate that by eliminating unexpected rate hikes and fees, the law could save consumers about $10 billion a year.

But critics say tougher rules will make credit more costly for good customers. If card issuers are barred from imposing retroactive rate hikes on existing balances, then they may try to make up the difference elsewhere. So, for example, consumers may see the return of annual fees on credit cards.

Years ago, credit card issuers routinely charged annual fees. But since the 1990s, most have eliminated them. Now, they may come back. Or there could be inactivity fees imposed on customers who don’t use their card very often.

Here are some of the key provisions:

— Interest Rates: Card issuers cannot increase interest rates during the first year on new accounts. In most cases, retroactive rate increases are prohibited.

— Payments and Billing: The issuer has to set the payment-due deadline on the same day each month.

— Fees: Consumers cannot be charged extra fees for making payments online, by phone or by mail.

— Disclosures: Issuers must notify cardholders of significant changes to their account terms at least 45 days before the changes take effect. If the consumer objects to the changes, he or she can close the account, or “opt out.”

— Young People: Consumers younger than 21 need an adult co-signer to open a credit card. In addition, the card issuers cannot entice students to sign up by offering free pizzas or other gifts within 1,000 feet of a college campus.
by Marilyn Geewax