WASHINGTON (Reuters) - The Federal Reserve is planning to crack down on credit card practices it views as consumer abuse. It has proposed a slew of new rules aimed at what Chairman Ben Bernanke termed a "new baseline for fairness."
The Fed particularly wants to win clearer, more accessible disclosures for consumers, and also wants to end some practices that tend to trap consumers into paying unexpected fees and interest.
That sounds good, but government rule-setting procedures being what they are, it will probably be 2009 before those proposed rules become a reality. In the meantime, consumers will have to fend for themselves. That means dealing with incomprehensible policy statements and hidden charges, "gotcha" punitive fees and surprise rate increases.
Here's what you should do now, while you're waiting for the Fed to dot its i's and cross its t's.
-- Read all of that small print. Your card issuer might switch you to fixed rates or a different way to calculate your rate as market interest rates fall. Some issuers have raised rates on customers who were late with payments to other companies. Some issuers have charged interest on late and over-limit fees. Those would be prohibited by the Fed's proposal.
-- Never be late with your payment. That's not as easy as it sounds. Issuers have been shortening their grace periods, changing their due dates from one month to another, and sometimes using specific times of day as cutoffs for timely payments. The best way to make sure you never pay a late fee is to pay your bill automatically from your checking account. You can authorize your bank to automatically pay a minimum due amount on the card every month. You can always add to that with a second payment (or by changing the amount) to pay the balance in full. But in a worst case scenario, at least you'll know that the minimum amount has been paid on time.
-- Don't use cards from issuers that use double billing cycles. This means that if you maintain a balance one month, and then pay it off, the second month, you'll be charged interest on the balance you paid off the month before. This is not a reasonable way to do business, and would be prohibited under the Fed's proposal. If you're not sure whether your issuer is doing this, call the customer service number and ask.
-- Use multiple cards. Don't use the same card for convenience shopping as the one you're using to pay down a debt. If possible, shift the debt to a zero-rate card. (Most of them currently are charging 3 percent in balance transfer fees, but if you get the zero percent interest deal for a year or 18 months, that could be worth it.)
-- Complain vociferously. Credit card consumer reps do have the ability to cancel the occasional late fee, drop your interest rate or make other moves to keep you happy. And there still is a lot of competition in this market. If you see a fee you don't like, call and complain. If you can't get satisfaction, stop using the card in question and use another one for a while.
-- Prepare for it to get worse as it gets better. Bankers say the Fed's proposed rules are unfair, and will cause them to charge good customers more. A year from now, cards might carry higher rates and annual fees, and some of the best rebate deals and zero-finance offers might be gone. But that competition won't dry up altogether, and good credit customers still present value to credit card issuers. If you're a person with a decent credit score and responsible credit card behavior, take advantage of all that's coming to you. That means shopping for new credit card deals all of the time, and reviewing the terms on the cards already in your wallet. If you think an issuer isn't playing fair, just tuck that card away in a drawer for a while and use another one.
(Linda Stern is a freelance writer. Any opinions in the column are solely those of Ms. Stern. You can e-mail her at lindastern@aol.com.)
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