Curing credit card shock

If you carry a balance on your credit cards, you may be in for a shock. A number of card companies have been quietly raising interest rates and fees on outstanding balances. I encourage you to take a close look at your latest statements to see if you are getting pinched.

Make a call

You may be able to ease your shock by calling the customer service number on the back of your card. Many card companies will lower your rate if your payment history is good.

Congress at work

Congress is also working on an antidote to credit card shock. Yesterday the House of Representatives passed legislation known as "The Credit Cardholders' Bill of Rights." The vote passed in a bipartisan landslide of 347 to 70. Sponsored by New York Representative Carolyn Maloney, H.R. 627 is a common-sense piece of legislation designed to establish clear ground rules for how credit card companies are to treat their customers. A Senate version of the bill, S. 235,  will likely be brought to a vote this next week and supporters hope to have a final version ready for the President's signature by Memorial Day.

As you can imagine credit card companies hate this bill. Where we see common sense reforms, they see lost profits. Here are some of the bill's key provisions. Take a look and tell me if you think any of these restrictions are unreasonable.

The Credit Cardholders' Bill of Rights:

  • Requires card companies to give 45 days notice before raising rates or making significant changes to the contract. This will allow consumers time to pay off their balances or shop for a better deal.
  • Requires card companies to send billing statements at least 21 calendar days before the due date and to credit payments made before 5pm on the due date as being "on time."
  • Prohibits the practice of "double-cycle billing" in which card companies effectively charge interest on debt that is paid on time.
  • Sets a specific definition for terms such as "fixed rate" or "prime rate" to prevent misleading or deceptive use of these terms.
  • Allows consumers the right to set a maximum credit limit on their cards.
  • Requires card companies to fairly allocate payments to balances billed at different interest rates. (Currently, many card companies require that cardholder repay lower interest balances first.)
  • Prohibits companies from issuing cards to minors.

Shop for a better deal

Even in tough economic times, credit card companies are willing to compete for your business so check around for better deals. is a great resource if you want to compare credit cards. You can also find good information at,

One quick caveat, switching cards too frequently can hurt your FICO score. Remember creditors like to see consistency and stability. Frequently switching credit cards and applying for new cards may cause them to think you are gearing up for a spending spree so try to limit your applications to no more than one every six months.

Avoid credit card debt

Benjamin Franklin said, "An ounce of prevention is worth a pound of cure." This applies to credit card shock, as well. You can prevent shock by avoiding the behaviors that lead to it. Pay off your card balances every month and pay your bills on time to avoid late fees.