Credit cards: New help for consumers, but risks remain

“With a stroke of his pen,” President Obama has transformed the way the credit card industry works, said Jeff Gelles in The Philadelphia Inquirer. Intended to prevent cash-strapped borrowers from falling into “financially crippling traps,” the new law goes into effect next February and will bar lenders from imposing “sky-high penalty interest rates” if payments are a day or two late. Moreover, issuers won’t be able to change interest rates at the drop of a hat; they’ll need to give 45 days’ notice and—except in the case of defaults—altered terms should only apply to new charges.

That doesn’t mean consumers can ignore the fine print or “start swiping that plastic worry-free,” said Aleksandra Todorova in SmartMoney. In fact, the lending picture might get decidedly less pleasant for cardholders who pay off their balance every month. To make up for revenue, issuers are likely to roll out new fees, according to Dennis Moroney, senior analyst for TowerGroup, a financial-industry research firm. “The pendulum may have swung in the wrong direction,” Moroney said. Among other things, expect annual fees—common in the 1980s but unheard of in recent years—“to make a comeback.” And say goodbye to no-interest teaser rates. “At best, consumers with excellent credit may receive introductory rates in the 6 percent range.” If you currently carry a balance on a low-interest card, “be on your best behavior” to hang onto that rate.

Card issuers have also threatened to slash rewards programs, said Ron Lieber in The New York Times. That would be bad news for cardholders who “milk” their cards for freebies. “My guess, however, is that this talk is just so much saber-rattling.” Issuers will still need rewards programs to stand out from the competition. In fact, issuers may offer big spenders even more perks to keep their loyalty. The most important thing for consumers—whether they carry high debt or pay every month—is to keep in mind that they don’t have to take big fees sitting down. Speak up, and threaten to take your business elsewhere. “After all, it may cost less to appease you than it would to replace you.”

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