With new regulations starting in less than a month, you may need to take stock of your credit card portfolio to determine which cards' terms are changing to your benefit and which feature changes that can hit you in the wallet.
The most important thing to do, says Lauren Bowne, staff attorney at San Francisco-based Consumers Union, is be aware of your card terms. So much has changed in recent months that consumers need to pay attention to what is and isn't featured in the credit card.
"Even if you're the person who pays off your balance and doesn't even have any credit card debt," says Bowne. "They might get a notice that says they're getting a $100 annual fee. Even people with stellar credit and stellar credit payment histories need to pay attention."
Here are five smart credit card moves to make before Feb. 22:
- Consider waiting to get new credit cards until after Feb. 22 because new accounts are protected from interest rate increases for the first year. As issuers compete for new customers in the new reform law landscape, there may be good deals and offers for people with good credit.
- For existing accounts, consider doing a balance transfer from higher interest rate cards to accounts with lower APRs. Some issuers are offering good customers balance transfers of at least a year. Remember that there is a cost of 3 percent or 4 percent of the amount transferred, so weigh that decision carefully. Also, take note of what the new interest rate will be AFTER the promotional period ends. If it's higher than the rate on the old card or only a few points lower, it may not be worth it to switch.
- Have a Plan B backup card or two: Issuers can still lower your credit limit and close your account without advance notice. Make sure you have more than one card as a backup in case this happens to you and you need a credit card for emergencies.
- Charge a small amount on those other cards every other month and pay it off in full when the bill comes. This avoids any dormancy fee that may be assessed and may prevent the company from closing the account for inactivity. Some issuers require a minimum amount of charging to avoid inactivity fees, so check your terms.
- Young adults' access to credit will be restricted by the new law. For college students or anyone under 21 who is responsible with credit, the best move could be to get a credit card now while you still can on your own. After Feb. 22, you will have to get an adult (over 21) co-signer and may be asked to show proof you have the ability to pay.
Some advice doesn't change
In addition to the moves to make before the law takes effect, good credit card habits remain important, some of them even more so.
Don't go overboard. Making too many changes within a short period -- as in opening or closing several accounts at once -- can hurt your credit score. If you're closing or adding new accounts and about to apply for a loan, it may be better to keep the cards you currently have -- even if the terms are worse. Closing an account that you've had for a long time can negatively impact the portion of your credit score related to credit utilization ratio.
Pay your bills on time. Even though the credit card law gives you a 60-day window for late payments before banks can impose penalty interest rates on existing balances, payments not received by the due date will show up as bad marks on your credit report.
Pay more than the minimum amount due. It will help you pay your credit card debt off faster. The new law mandates that your billing statement include a prominent notice of how long it will take you to pay off your debt. For many, that could be a wake-up call.
If you're having trouble paying your bills, get help from an accredited nonprofit credit counselor.Your monthly credit card statement will feature a toll-free number to call for help. The credit card reform law requires that issuers prominently display a toll-free number that consumers can call to get the names of at least three consumer credit counseling agencies that have been approved by the U.S. bankruptcy courts for credit and debt management counseling.
Stay on top of your mail. The new law requires that credit card issuers notify you of changes to your account. That means you can't leave that mail unopened on the table for a week. Some changes are likely to have deadlines and time elements that can hurt you financially if you don't act quickly.
Bowne, from the consumer group, recommends consumers create a list of their credit card accounts that includes key terms (i.e., the interest rates for purchases, balance transfers and cash advances, fees, due dates and grace period). She recommends marking your calendar to remind yourself when promotional rates end so that you can be sure to pay off the balance before higher interest rates begin on those accounts.
"It requires a lot of organization and a lot of time," Bowne says. "The more credit cards you have, the more things you've got to juggle and the more things you've got to know."
She adds: "At least now, luckily, your credit card due date will be on the same day each month."