Credit card companies will soon have to abide by new federal regulations meant to protect consumers from interest-rate increases and other unfair credit card practices, reports The Associated Press (“Regulators Adopt New Credit Card Rules,” Dec. 19, 2008).

This month federal regulators agreed to impose some of the most sweeping limitations on the credit card industry seen in decades, preventing credit card companies from raising interest rates on consumers’ current credit card balances.

The new rules, which go into effect in July 2010, state that card companies can only raise interest rates on new credit cards and future purchases or cash advances, unlike now when companies’ credit card contracts allow them to raise consumers’ interest rates indiscriminately and with little warning.

“These protections will allow consumers to access credit on terms that are fair and more easily understood,” Federal Reserve Chairman Ben Bernanke said in a statement.

What the Regulations Mean For You

Fees. Creditors can’t penalize you with high fees for exceeding the limit on a credit card that gets placed on hold. And creditors can’t charge you a security deposit or other fees just for issuing you credit or making credit available.

Billing. Creditors can’t double-cycle bill you, meaning that banks can’t charge you interest on balances that you carry over from one billing cycle to the next. You can only be charged interest on the balance amount that remains unpaid, not the full amount you previously owed.

Balances. Lenders who have borrowers with multiple credit cards will be required to apply any payment that borrower makes above the required minimum toward the borrower’s lowest-rate balance.

Terms. Lenders will be required to give you 45 days notice before they can make any changes to the terms of your account.

Late payments. Creditors have to give you a reasonable period of time to make your payment before it can be considered late.

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