Giving credit card consumers a fair shake

Unfair and deceptive practices by the credit card industry prompted federal regulators in May to propose a tough new rule (PDF) to give consumers a fair shake on their charge cards. But that rule is far from a sure thing - the big banks have lined up in opposition, and one federal banking agency even urged that it be watered down.

At the same time, legislation in Congress may soon put stricter oversight on credit cards—with your help! HR 5244, the Credit Cardholders Bill of Rights, passed the House during Congress’ struggle with the economic crisis, but the Senate has yet to vote on any bill. Senator Dodd has proposed S. 3252. These bills will take the Federal Reserve proposal a step further for you! Click here to learn more about the Congressional efforts.

If the Fed doesn't enact a strong final rule in December, we could be in for even further economic meltdown. Americans carry nearly a trillion dollars in credit card debt, and if the banks randomly hike interest rates and fees on that debt, families could face financial crisis.

You sent more than 56,000 comments to the Federal Reserve Board in support of the new proposed rule. Please sign our petition urging the Fed to not waiver, and enact a strong rule in December

Consumers Union is urging the Fed to do more to level the playing field, including:

  • Limit "penalty" high-interest rates, and how long card companies can keep you at these extremely high rates.
  • Prohibiting fees for paying a credit card by phone or Internet.
  • Ending random changes in interest rates for future purchases "at any time for any reason."
  • Prohibiting account-opening fees no more than 10 percent of the credit limit. Multiple over-limit fees also should be banned during a single billing cycle.
  • Ending ALL over-limit fees when it's the card company's fault. You shouldn't be penalized when the company approves a transaction, or charges you fees, that put you over your credit limit.

Read CU's comments to the proposed rule on credit cards (PDF) and overdraft fees (PDF). We'll let you know what final reforms are issued in December.

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Top 10 Credit Card Traps: (PDF)

  1. Universal default
    The utility bill you sent in a little late may be the reason for your card's skyrocketing interest rate.
  2. Change of terms
    Credit card terms are always in flux---those long notices in tiny print may mean you lose.
  3. Teaser rates
    The low rate you signed up for expires suddenly---you pay more.
  4. Minimum payments
    If you pay the minimum payment every month you may be on the hook for a very long time. Click for details!
  5. On time payment
    You mail the bill before the due date, but it still might be counted as late.
  6. Double cycle billing
    If you alternate between paying off and carrying a balance, you're paying more interest.
  7. Cash advances/convenience checks
    The interest rates on these are higher than for your credit card.
  8. Penalty interest rates
    Late payments can raise your interest rate from 7% to 27%!
  9. Fees, fees, and more fees
    As if the penalties weren't enough, more fees for pay-by-phone, charging abroad.
  10. Balance transfer switcheroos
    A seemingly lower APR increases your debt!