How to cope until new credit card law takes effect

Consumer protections don't start right away

By Connie Prater

The toughest credit card rules in history were signed into law by President Barack Obama May 22, but that doesn't mean change will come overnight. The earliest that consumer protections will kick in is Aug. 20,, when mandatory 45 days' advance notice of significant credit card changes go into effect. The most significant consumer protections -- limiting interest rate hikes to only a few circumstances -- won't start until Feb. 22, 2010.

"The truth is that the changes aren't going to take effect anytime soon," says Gail Cunningham, spokeswoman for the National Foundation for Consumer Credit (NFCC).

"The issuers have to make significant internal changes technically and to their business models, and that takes time. There are two schools of thought about whether or not the creditors will continue changing the terms," Cunningham adds. "Some feel that there's been so much bad press that it will stop. Others think that they will continue until they are forced to stop."

What should consumers do in the meantime? Credit experts say you should keep up with the basics of handling credit:

• Watch those monthly statements.
• Pay off as much credit card debt as possible.
• Reduce spending to avoid relying on credit to meet basic living needs.

In addition, "The savvy consumer might consider obtaining additional lines of credit while they can in case the bottom falls out with their existing creditor," advises Cunningham. "Many people have been blindsided by having their card limit lowered to very close to their existing balance, thus limiting additional access to credit. Others have had their cards closed. For years, I taught that a wallet full of credit cards doesn't impress anyone other than your brother-in-law, but in today's environment it's good advice to have a few. I'm not suggesting that people apply for many, just one or two additional cards. Charge a little each month to keep them active, and pay the bill in full when it arrives."

Until the new federal law kicks in (See What the new credit card rules mean to you), she recommends consumers carefully read all mail and correspondence from creditors.

"All those mail stuffers, start reading those," she says. Cardholders "need to really keep a close eye on that for any change in terms, such as the annual percentage rate and the credit limit. If they see any change in the terms, they need to contact their creditor immediately and find out why."

Ask to speak to a supervisor and ask about opting out of the interest rate increase, she says.

When making credit card payments, pay early, don't miss any payments and pay at least the minimum (preferably more), Cunningham says, adding that bills may be delayed in the U.S. mail and cardholders may not have as much time as they think to get a payment in before the deadline.

"You better open that bill and pay it that day," Cunningham says. "We're seeing many 20-day grace periods. Why risk having a ding on your credit score?"

Another good rule: Don't max out your credit cards. Try to keep balances at 30 percent of the credit limit or lower. Not doing so, "puts you into the risk category in the creditors' eyes. What they really like to see is a credit utilization ratio of no more than 30 percent," Cunningham says. "If you exceed 30 percent, devote any extra money you have to paying that down to get it into the range of 30 percent or less."

See related: Obama signs credit card reform bill into law, A comprehensive guide to the new Credit CARD Act, What people are saying about the new credit card law, Interactive timeline: How the credit card reform bill became law and when its provisions take effect, Annual fees return in credit card mail offers, House easily passes credit card reform, Senate passes tough new credit card reform bill, House passes Credit Cardholders' Bill of Rights, Regulators issue sweeping new credit card rules, What the new credit card rules mean to you, Interactive look at what new monthly credit card statements would disclose, Fed backs rules to curb deceptive credit card practices, Fed moves to close timing loophole in credit card payments, Senate banking chairman: Credit card reform on tap, Proposed credit card rule changes draw massive response, Poll: Nearly 3 in 4 feel need for more credit card regulation, Obama will usher in credit card reform, observers say 

Updated: May 20, 2009

	Three most recent Credit account management stories: 5 credit card opt-out oopses to avoid – Even if you’ve opted out of a credit card interest rate increase, these costly mishaps can trigger an unwanted rate hike ... For convenience checks, you pay a price – When it comes to convenience checks, your best bet is to proceed carefully. The fees and interest on convenience checks can quickly escalate, and they can be potential targets for identity thieves ... Guru goofs: 7 financial experts confess their money mistakes – Famous financial experts divulge details about past bankruptcies, overdrafts and budgeting gone wrong ...

	CreditCards.com's newsletter Did you like this story? Then sign up for CreditCards.com’s weekly e-newsletter for the latest news, advice, articles and tips. It's FREE. Once a week you will receive the top credit card industry news in your inbox. Sign up now!