Everyday Cheapskate

Last year, the Federal Reserve Board announced new rules for banks that issue credit cards. The rules will remove unfair credit card practices. Months later, Congress passed into law the new Credit Card Accountability, Responsibility and Disclosure Act of 2009. Both of these become effective in February. That's like telling a rebellious teenager, "You're grounded ... in 10 months."

I laughed when the summary of the Fed's rules stated that while they will not become effective until 2010, banks voluntarily should comply immediately. Yeah, right. On what planet, I wonder, did the Fed think that might happen?

I wrote in this column that the timing of the Credit CARD Act gives banks a great big grace period to find new ways to pad their profits to make up for what they will lose when the new law kicks in.

It appears as if I was right. As reported in a New York Times editorial, "Last-Minute Credit Card Tricks," banks made it appear that they would need all the lead time to get their computers reprogrammed for the new law. Surprise! They've actually used this time to drive already-outrageous interest rates still higher and add fees that are pushing customers even further into debt. The Pew Safe Credit Cards Project has determined that credit card interest rates rose by 20 percent in the first two quarters of 2009.

A new House bill introduced recently would put an end to this practice by making the Credit CARD Act effective Dec.

Think that'll happen? I don't. And if it does, don't get too excited. Already, banks are creating new ways to hide fees and to manipulate loopholes in the law so as to restore their income streams from credit cards and expand their profit margins even after the new law becomes effective.

If you have received notice of a rate increase, it's likely that it came with an opportunity to "opt out." The dilemma: Opting out of the new terms would mean your account would be closed, though you would be given time to repay the debt at your old rate. The trade-off is the damage a closed account would do to your credit score. You have to weigh the pros and cons. If you choose to opt out, the damage to your score should be temporary. In the meantime, you'll have a better shot at getting rid of that balance more quickly and permanently.

Listen to me. There is no way you can play the credit card game and hope to survive if you are paying interest on your accounts. We're talking about interest rates up to almost 30 percent! Clearly, the outrageousness of the credit card industry is not going away any time soon.

Please, I'm begging you. Get rid of your credit card debt. Whatever it takes, do it!

Mary Hunt is the founder of www.DebtProofLiving.com and author of 18 books, including her latest, "Can I Pay My Credit Card Bill With a Credit Card?" You can e-mail her at mary@everydaycheapskate.com, or write to Everyday Cheapskate, P.O. Box 2135, Paramount, CA 90723. To find out more about Mary Hunt and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.

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