New Credit-Card Law Could Backfire

New: Credit card interest will be subject to new rules

The contention surrounding cash advances from payday lenders begins to pale when compared to the money-making tactics of credit card companies. In an effort to prevent cash-strapped borrowers from falling into credit card traps, President Obama is transforming the way that industry works.

A new law scheduled to go into effect next February will prevent credit card lenders from imposing astronomical interest rates when payments are made a day or two late. Additionally, credit card companies won't be able to change interest rates at the drop of a hat. Instead, they'll be required to give 45 days' notice, and except in the case of defaults, altered credit card terms will apply only to new charges.

But lenders can dream up new fees

That doesn't mean consumers should ignore the fine print or start paying for everything with plastic. In fact, the credit-card lending situation could get decidedly less favorable for cardholders who pay off their balances every month. According to Dennis Moroney, senior analyst for TowerGroup, a financial-industry research firm, credit card issuers are likely to invent new fees to make up for revenues lost under the new interest rate legislation.

Or reinstate old fees

"The pendulum may have swung in the wrong direction," Moroney said in a recent SmartMoney interview. Among other things, Moroney expects a return of annual fees, which were common in the 1980s but have been almost unheard of in recent years. He also predicts that no-interest teaser rates will quickly become a thing of the past. "At best," he says, consumers with excellent credit may receive introductory rates in the six-percent range." If you currently carry a balance on a low-interest rate card, he advises, "be on your best behavior" to hang onto that rate. ... click here to read the rest of the article titled "New Credit-Card Law Could Backfire"