New credit card law is mixed blessing

February 22, 2010 6:33:22 PM PST
A new credit card law goes into effect today. It's designed to protect you, but it's coming with mixed blessings. If you've ever felt like a credit card company has ripped you off, you're probably going to like this law. But there are still some things you need to watch out for as a consumer.

The biggest change has to do with those sky-high interest rates. Until today, banks could raise the interest rate on an account at any time, including the rate on existing balances, even if you were not late on payments.

Now, they can't raise the rate in the first year after an account is opened, unless an introductory rate has come to an end. And even after that, cardholders must be notified 45 days in advance of any rate change. For existing balances, rates can't be raised unless the account is at least 60 days past due.

If you make your payments on time for six consecutive months, the original rate must be restored. So consumers are actually rewarded for responsible behavior. But there is no cap on rates, so you still need to read the fine print.

Cardholders will also see exactly how many months it will take to pay off a balance if they make just the minimum payments. Now your statements will even tell you how much you'd have to pay each month to pay off the balance within three years.

Another big change could stop that onslaught of credit card offers for new college students. No one under the age of 21 will be able to get a credit card unless they prove they can pay the debt, or a parent or guardian co-signs.

President Obama signed the law last May, which gave banks plenty of time to get to know it. Consumer advocates say you still need to look at your statements. Banks can still create new fees and raise old ones.