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Family Finances: FAQs on the New Credit Card Rules

By Joan Goldwasser, Source: Kiplinger's Money Power

Consumer-friendly rules mandated by the Credit Card Accountability Responsibility and Disclosure Act of 2009 take effect on Feb. 22. Not sure what the new rules mean to you? We have answers to your questions.

I just received a notice from my card issuer with a lot of fine print. What should I do?

Read every word. A recent Federal Reserve Board survey showed that nearly half the banks have changed their cards' terms and conditions or plan to do so before the rules go into effect. Among the things to look for: an increase in your late fee, a drop in your credit limit or a new annual fee.

Can the bank still raise my interest rate?

Yes. The issuer can raise the rate on an existing card as long as you are given 45 days' notice. If you get a new card, the issuer may not increase the interest rate for one year, and then it may charge the higher rate only on new purchases, not any existing balance. There are, however, some significant exceptions to this prohibition. Even on a new card, your rate can go up if it is based on an index that fluctuates, such as the prime rate, or if you are more than 60 days late making a minimum payment.

I changed cards to snag a low rate on balance transfers. But the rate for new purchases is much higher. What happens when I pay my bill?

The CARD Act really helps here. It requires issuers to apply your payment to the balance with the higher rate. Previously, issuers automatically applied payments to the lowest-rate balance.

I lost my job, and I'm having trouble paying my mortgage. But I've kept up the payments on my credit card. Can the issuer cancel my card?

No. Paying a mortgage or any other bill late no longer affects your credit card. Your payment record on the card itself is all that matters.

My credit score recently dropped to 680. Can I still qualify for a credit card?

With default rates hovering around 11 percent, issuers are making it more difficult to qualify for a card if your credit score is below 700. Try applying at an institution where you have a checking account, mortgage or certificate of deposit, recommends Ken Lin, of CreditKarma.com. If that doesn't work, you could get a secured card -- you'll deposit a sum in the bank, which then becomes your credit limit. After a year of making on-time payments, you may qualify for an unsecured card.

(Joan Goldwasser is a senior reporter at Kiplinger's Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. And for more on this and similar money topics, visit Kiplinger.com.)