Around 18,000 customers of Capital One Financial Corp. will receive reimbursements totaling $775,000 in annual credit-card membership fees after the Office of the Comptroller of the Currency (OCC) deemed them as unfair.

Capital One was found to have unjustly billed 3,400 cardholders $125,000 in annual fees even after they have closed their accounts from 2004 to 2006. The bank acknowledged the error and fixed the problem in 2006.

According to a bank statement, the discrepancy was a result of a technical problem, which was fixed after Capital One converted its transaction processing system four years ago.

The bank also expanded the refund to include 15,000 more customers they also discovered to have been wrongly charged.

Most of these customers, they said, did not even know of the error and had paid the annual fee. The bank said it only reimbursed the fee to those who complained.

In a statement, the bank said it regretted it not having proactively reimbursed all the customers who were affected. To resolve the case, Capital One said it was tracking down all their former cardholders who paid the annual fee and reimburse it.

Lenders had shelved annual fees as it turned away customers. Today only 20 percent of all banks in the U.S. charge annual fees. But as the CARD Act takes effect on Monday which places new restrictions on interest rates and overdraft fees, issuers have begun charging annual fees again to make up for lost business.

Citigroup has sent letters to cardholders that said it will charge $60 in annual fees for purchases up to $2400 during that year starting on April 1.

However, financial regulators and the attorneys general have taken broad measures against these bank fees. New York Attorney General Andrew Cuomo prevented a retail bank of Citigroup to charge a fee for checking accounts, which were previously free. Cuomo said Citibank could not charge such checking account fees because the bank had not given enough clear notice to customers.

Before expanding into banking, Capital One was among the country’s largest monoline credit-card lenders. Capital One is currently the eighth-largest bank in terms of deposits. Early in the financial crisis, the bank sharply curbed credit card lending to make them turn out in considerably better shape than other banks despite its immense portfolio of nonprime card loans.

With deposits totaling $116 billion and loans reaching $90 billion, Capital One posted a $312 million profit in 2009 from a $79 million loss in 2008.

Visa credit cards recently announced that they will be expanding their no signature required for credit card transactions below $25 to 98% of its 800 retailer categories, in their efforts to find ways to help retailers or stores facilitate their payment transactions.

Fantastic Sams a hair salon located in Bradenton, Florida is thrilled with the recent decision of the credit card issuer and expects transactions to be completed much faster with the new program in place.  The salon only has three hair stylists and gets a huge volume of clients who comes and goes daily.  The new program fits into their business model as they are understaffed and they don’t like to make their customers wait unnecessarily for receipts or proofs of payment.

MasterCard has a similar program that has been in operations since 1991 and has grown over the years to include stores or shops such as convenience stores and groceries, where fast transactions are essential.  In their program, cardholders are not required to sign receipts for purchases ranging from $15 to $50, depending on the merchant type.  Receipts are also optional in such cases.

Not everyone though looks favourably to such programs.  Linda Foley of Identity Theft Resource Center said that no signature schemes can be a cause of serious concern to consumers like her.  When people are not required to sign receipts, a store staff will have no way to verify the signature behind a credit card.  She added that thieves go after small purchases, which can be compounded quite easily.

Jeffrey Sklar, who manages the fraud department of NY accounting firm Sklar, Heyman & Co., says that the people who are at most risk with such programs are those who lost their wallets or credit cards. Signatures provide additional security to users such that if they don’t match with ones on the back of credit cards, store personnel can ask for additional identification.  In addition, consumers typically don’t check every entry on their credit card statements and would not bother examining small purchases such as the ones made in convenience stores or gas stations.  What’s scary is that many fraud transactions start out in small amounts.

If in case a consumer does report a suspicious entry in his card statement that is not substantial in cost, banks would normally not waste their time investigating such cases, which makes the practice of scrutinizing small amounts futile and counterproductive.

Advocates of no signature campaigns counter that banks put such programs in place based on the risks involved. They believe that thieves would really not bother using credit cards for small amounts, since many purchase items that they can resell later.  MasterCard officials added that credit card fraud incidents have not increased since their no signature program was launched in 2003, and they see the campaign as safe and beneficial for both consumers and retailers.

Three leading credit card issuers have disclosed better-than-foreseen delinquency and charge-off rates last month but the worst is far from over.

These banks, Bank of America, Capital One and Discover, remain in a stressed environment, with consumers still emerging from peaking rates of unemployment. As it is, these delinquency and charge-offs remain high.

But these issuers are taking advantage of people defaulting on their home loans to pay off their credit cards. The usual practice was actually the other way around, with credit cards defaulted to pay mortgages, leading to increased credit card delinquencies.

According to studies, around 6.6 percent of consumers have been current this year on their credit accounts while remaining delinquent on their mortgages. This rose from 4.8 percent in 2008.

To further check delinquency, people are still cutting back on credit card use, with the outstanding credit card debt falling annually. This year it fell to $855 billion from $980 billion in 2008. This year, it is predicted to drop another $80 billion.

Bank of America reported that loans that are past 30 days due have fallen to 7.35 percent last month from 7.44 percent in December. Charge-offs, on the other hand, slid from 13.53 percent in December to 13.25 percent last month.

However, Capital One maintained it had 30-day delinquencies rising to 5.8 per cent from 5.78 percent the previous year. Charge-offs were also up from 10.14 per cent to 10.41 percent. Discover’s delinquency rate, meanwhile, rose from 5.49 percent to 5.55 percent. Charge-offs slid from 8.68 percent to 8.58 percent.

Seasonal trends for both key credit indicators are difficult to determine. Such charge-offs tend to climb early in the year with people trying to settle holiday debts, while bankruptcy rates soar as spring nears.

With delinquency seen to improve further, lesser credit card defaults and fewer charge-offs are expected. According to analysts, this can be attained if bankruptcies will remain low and unemployment is checked.

As unemployment drifts around the 10 percent range and household finances remain under terrible strain, issuers and lenders still see their delinquencies and charge-offs rising in the near term. But these are slowing down and improving even as net charge-offs have increased to 10.5 percent in January.

This may not be far off from the highest net charge-off rate of 10.8% reported in August 2009, but the 5.8 percent net decline in data delinquency rates, which is being used by issuers and lenders to foresee future defaults, have led analysts to predict lesser charge-offs in the future.

Crouse, 56, a Maryland resident, is a victim of identity theft.   In less than six months, his name and account number had been used to rack up unauthorized transactions amounting to $900,000. He has since been trying to clear up his name and jack up his sagging credit standing, spending $100,000 in the process.

Previously, Crouse held a high paying job at a construction company and was financially comfortable.  He frequented online retail stores, auctioned items at eBay and used his ATM card liberally. Then on February 2009, he started noticing suspicious charges on his credit card billing statement.  Unauthorized purchases gradually piled up and by August 2009, he started receiving notices of charges amounting to thousands of dollars of purchases made in a single day. The problem became so huge that he had to daily go to banks to sign affidavits to clear his name of unauthorized transactions.

Adding insult to injury, Crouse was laid off of his job in March 2009 and was forced to rely on meagre unemployment checks and savings.

One time Crouse opened a new account and was immediately hit with a $1,100 charge within hours of approval.  Bank officials informed him that he may have fallen prey to malware which picked up his personal information while he was transacting online.  There were also cases of people using his name to open credit card accounts and subsequently used them to purchase items such as appliances and clothes.

Crouse became so frustrated and desperate that he even contemplated suicide.  He felt that his life was spiralling out of control and he saw no end in sight to his misery. Since he didn’t have a steady source of income, he eventually fell behind on his bill payments, forcing him to let go of some prize possessions such as a vintage car and gold jewellery.  One son had to drop out of college as he was no longer able to finance his studies.

When he tried to find employment, employers rejected his application due to his low credit score and massive debts.  He eventually found work but had to take a substantial salary cut as his clearance to work in government buildings has been unceremoniously invalidated due to bad debts.

He now lives a simple life and had to forego a number of luxuries that he had been accustomed to when he was still earning well.  He advises cardholders to not sign up to free trial offers online as he suspects that his identity was stolen in this manner.  He also cautioned people not to give out personal information to individuals unless they are sure that it is for a legitimate purpose and to always keep receipts of their purchases.

Typically credit card issuers offer attractive credit card balance transfer deals, wherein cardholders can transfer their credit card balance to another bank for a small fee.  What’s good about these types of deals is that they normally carry low interest rates, with some banks even offering zero interest grace periods.  These programs are targeted towards individuals who find interest fees of an existing issuer to be exorbitant and are actively seeking some form of relief.  Balance transfers are also clever programs employed by credit card companies to “steal” or “poach” customers from rivals.

Lately however, credit card companies have been jacking up their credit card balance transfer fees and cutting down grace periods.  This prompted industry experts to advice consumers today to not delay transferring balances if they intend to do so, since there is a strong likelihood that fees may further increase.

Traditionally, credit card companies charge cardholders around 3% for balance transfer fees.  Recent months however have shown many credit card issuers such as Chase Freedom and Discover More hike fees by up to 5%.  Experts view this phenomenon as another move by banks to increase profitability at the expense of consumers. Beginning 2009, more and more banks have started to remove caps on amounts that can be applied transfer fees. Previously cardholders were made to pay fees of no more than 3% for transfers ranging from $75 to $100. Today, many banks have raised fees to 4% to 5% regardless of the amount.

Experts recommend individuals to examine closely credit card offers first before considering getting a balance transfer.  Many companies put out catchy ads that promise attractive rates but hide important details in fine print.  Some offers boast of long grace periods but in reality are only applicable to those who have excellent credit histories.

For example, Citi Platinum Select MasterCard offers a 0% balance transfer fees to users for up to 12 months.  However, a closer look into the details would tell you that their offer is good only for those who meet the bank’s criteria on credit scores.   Additional provisions also reveal that the 0% offer is applicable only for the first seven months, and that the succeeding months would cost cardholders 20%.  The bank also does not specifically say what their standard criteria are for credit scores and so you would have no way to find out in advance if you qualify for their 0% offer.

Some banks on the other hand allow applicants to transfer their balance while they are completing their online application without informing them if their credit scores qualify them for their low to zero balance transfer programs.

For people considering balance transfers, it is highly recommended to examine first the details of a balance transfer offer to know what the real provisions are since many companies today resort to sugar-coating their advertisements to lure more customers.

The State of Illinois has recently filed lawsuits against four debt settlement firms for deceptive business practices, charging exorbitant fees, and not helping alleviate the plight of customers.  City officials are also now mulling on creating legislation that would increase the penalties on abusive debt settlement companies.

According to a city official, many hard-up customers today are getting ripped off by seemingly credible debt relief outfits.

The marketing campaigns of these companies are very catchy and many people are fooled into believing that they can easily extricate themselves out of their financial bind if they just sign up with them.  In reality, these companies ask substantial amounts of money from customers, but offer little or no guarantees that their problems will be resolved.  Many people end up in far worse conditions than when they started.

One recent complainant is a woman from Tollhouse, California who engaged the services of a company named Guardian Credit Solution. She initially paid the company $4490.00 to do a loan modification, which she claimed they never did.  She again signed up for another debt settlement program lured by the promise of a company staff that her loan modification case would be processed faster if she did so.  As expected the company failed to deliver on their promise, and the woman ended up with bigger debts than when she started.

Typically, customers pay high upfront fees to debt settlement firms at the start. They would then be advised not to pay their credit card bills. Customers would then continue to pay the companies more money for the continuation of the firm’s services, leaving them with little resources to put away for settlement purposes.

As a result of their non-payment of their credit card bills, banks would charge customers with more penalty and interest fees and often times begin collection efforts, which aggravates the financial condition of customers.  And even while customers are enrolled in debt settlement programs, many banks initiate lawsuits to demand for payment of their outstanding balances.

The defendants in the lawsuit filed by the State of Illinois are: 1) Orion Processing, LLC, Swiftrock Financial, Inc., Clear Your Debt, LLC, Derin Scott and Shannon Scott.; 2) DebtOne Financial and Endebt Solutions, LLC; 3) Debt Consultants of America, Inc., Robert J. Creel; 4) American Debt Arbitration of Clearwater, Glenn P. Stewart; 5) Nationwide Asset Services, Inc., William Anderson and Gary K. Brown.

All of the defendants are charged with violating the provisions of the Illinois Consumer Fraud and Deceptive Business Practices Act by lying to customers on the types of services they can render and offer. The state is also petitioning the court to bar the said companies from conducting business in Illinois.

Jason Slat is an ardent user of credit cards and ATM cards but had never fallen victim to identity thieves until one day.  It was around 6 pm when he received a call from a man who identified himself as a bank representative. He asked Jason if he had a credit card with them and he answered in the affirmative.  He then informed him that there had been an activity a few minutes ago wherein a transaction online was used on his credit card. A charge of one dollar appeared on his credit card account and the bank representative was verifying if Jason indeed made that transaction before he could validate it. Jason felt uneasy.  It seemed kind of odd for banks to be quick in detecting suspicious transactions but the guy on the other line did not ask any account information from him.  He answered back in the negative.

The other guy went on to explain that someone had just attempted to charge his credit card with one dollar at an online store.  The bank decided to call him before validating the purchase since it has been three months since his credit card had been used and they suspect that it is being used for fraudulent purposes.  The representative explained that someone might be running a test charge on his credit card, as is the practice of identity thieves before they make any substantial purchases on a card. He then informed Jason that they would be putting a fraud block on his credit card. He also ordered him to go any branch of the bank the next day, inform a staff that one of his cards had been placed on fraud block so he could be issued a new card.

This was the first time in many years that he had been involved in such an incident and Jason was visibly shaken.  He told the representative that he only used the card thrice in 20 years and only to access bank machines.  The bank representative suggested that someone might have put a skimmer in a bank machine and captured his credit card information.

The next day he went to a bank branch as told and surrendered his card. He initially made a mistake as he turned over his debit card.  He realized that the credit card that was in contention had been stashed away for years in a cabinet drawer.   Later, a bank officer informed him that indeed a fraud block had been placed on his credit card and that someone attempted to use it the day before to make a purchase at an online retail store.  He was then issued a new credit card.

In Europe, banks have already instituted new bank practices that would prevent identity fraud.  One such practice would require an individual to punch in a PIN number before he could use a credit card. The United States however has not yet developed similar sophisticated systems and is said to be behind Europe in such technologies by three years.

Credit union issued credit cards offer a lot of benefits to users that bank-issued cards don’t.  These types of credit cards typically offer lower interest fees and charges compared to conventional credit cards.  Since credit unions are not for profit organizations owned by members, they can afford to offer very competitive rates. According to a survey conducted by the Pew Charitable Trusts, the average interest rate of credit union credit cards range from 9.9% to 13.8%, compared to bank rates, which ranges from 12.2% to 17.9%.

By law, federally charted credit unions cannot impose interest fees higher than 15%, except under certain conditions. For now due to the weak business climate, that limit has been raised to 18%, which is still reasonable by today’s standards. Non-federal chartered credit unions on the other hand observe interest caps that are determined by their respective states, with most rate ceilings falling below 18% according to the Credit Union National Association.

Credit unions are also known to charge lower penalty fees and other rates.  For example, banks on average charge cardholders $39 for late payments and over the limit spending, while credit union credit cardholders only pay $20 in penalty fees on average.  Majority of banks also charge for balance transfer fees while only a quarter of registered credit unions do so.  Cash advances on average cost anywhere from 20.2% to 21.2% for bank-issued credit cards compared to 10.2% to 13.8% for credit union credit cards. Lower penalty fees and rates are particularly helpful to individuals who carry balances on their credit cards.

And since credit unions generally have small operations, customers can get more personalized customer service.  The downside of it is that they usually have limited hours not unlike banks which have dedicated customer service teams available 24 hours a day, 7 days a week.

One minor downside to owning credit union issued credit cards is rewards feature.  Most if not all credit union credit cards do not earn rewards and so if you are looking at earning points for your purchases, you would be better off getting a bank-issued credit card. Also, unlike conventional credit cards, you need to acquire a share in a credit union before you can qualify for their credit cards.  According to a study conducted by the Credit Union National Association, share value ranges anywhere from $5 to $50. Some credit unions charge credit card applicants a one-time joining fee.  Fees could be as low as $1 to as high as $50.

Low sales receipts taxes have attracted hordes of US companies, mostly small-scale to medium –scale firms, to set-up payment processing facilities in Caribbean countries such as St. Kitts and Aruba. SWAT, a small software design outfit based in New York, directs their credit card payments to a bank in Panama, which saves them a considerable amount of money in taxes. Panama charges far lower sales taxes compared to the US.

Another US company, Red Ball, which is a small online retailer, divert their credit card payments to the tropical island of Nevis, another country favoured by businesses due to their low taxes.

SWAT and Red Ball are just two of the thousands of small businesses which have decided to set-up offshore facilities in business friendly Caribbean countries such as Panama, Nevis, and Cayman Islands to minimize their tax costs.  This growing trend has caught the attention of the IRS, and they are currently looking into the impact of this tax flight phenomenon to the US economy. The bureau estimates that the US loses around $100 billion in tax money to tax-haven countries every year.  The US government also suspects that many companies that have offshore payment processing facilities under report their revenues to reduce their tax liabilities.

Affected companies however state that they are not breaking any US law and that what they are doing is completely legal and aboveboard.  Their customers are not charged US sales taxes since they are incorporated overseas, and the IRS is informed of this type of arrangement.  They added that they pay taxes for the money that they bring back to the U.S. Tax experts admit that companies are not liable of any wrongdoing if they employ such practices.  Apart from the more obvious gain of lower taxes, many companies also choose to open offshore facilities to avoid frivolous lawsuits and high processing fees back home.

Some small firms also complain that they are compelled to route their payments offshore since domestic banks show little interest in working with them as they are considered as “high-risk” enterprises.  Businesses like small-scale fitness gyms and ticket sellers are prone to charge-backs, and thus have a hard time securing merchant accounts.  Banks traditionally don’t like dealing with small companies that have high rates of cancellation, since they can be costly to service.

Lawmakers familiar with tax laws say that there is no valid reason as to why US businesses need to set up banking facilities for credit card payments.  They believe that the only motivation as to why companies do so is to evade taxes, a reason they find unacceptable.

The new credit card regulations which will be coming with the partial activation of the Credit CARD Act on February 22 have long been awaited by credit card holders. The act, which was made into law last year, is aimed at reducing the risks that consumers take on when they get credit cards. While a lot of consumers are excited at the thought that regulators are finally trying to make the credit card industry fairer for them, there are others who are not that impressed with the new rules and are doing away with credit altogether.

While a bit surprising, it isn’t hard to understand why some consumers would prefer to opt out of credit cards even with the promise of consumer protection. For starters, credit card companies have rarely been fair with their dealings with consumers. That has created a lot of animosity among consumers, animosity which only increased when the credit card companies began introducing new abusive credit card term changes when the Credit CARD Act got signed into law.

As a matter of fact, eve since last summer, credit card companies have been busy changing their credit card terms as much as they can to circumvent the regulations of the Credit CARD Act beforehand. Thus, consumers saw their interest rates and fees go sky high, their credits cut and new fees getting added on their credit card terms. That is just to name a few.

The decision of a few consumers to get out of the credit card game completely underlines the fact that, when it comes to credit cards, the consumers are ultimately the ones who are in control. The credit card industry can change their terms as much as they want but if the consumers decide to walk away, then it would all be useless.

For consumers who are on the fence at the moment, who cannot decide whether to go for a credit-free lifestyle or to keep their credit cards, it is important to know that living without credit cards has its penalties as well. Credit cards can be very useful in times of unexpected financial need. Not to mention that credit cards build up credit scores which is very important when it is time to take out a loan or a mortgage.

Besides, even with the many holes that credit card companies have poked in the Credit CARD Act, it can still be a very helpful piece of legislation. For example, arbitrary interest rate changes will no longer be much of a problem. Credit card holders will have to remember to keep an eye on the fine print of their credit card terms, however, just in case.

Among the many regulations included in the Credit CARD Act are a few that specifically target the ability of teenagers to get credit cards. These rules give more powers to parents regarding their teenagers’ credit card usage, namely by making them a necessity whenever a teenager applies for a credit card.

The new rules of the Credit CARD Act forces teenage credit card applicants to prove that they can pay off their debts before they get their credit cards. They can either show that they have the income to pay off their debts or that they can get a co-signer for their application, usually their parents.

That’s a good thing for parents since it gives them a bit of control over their teenagers’ credit card spending. A lot of parents are most likely going to decide to keep their teenagers off credit cards altogether, considering the high risk of credit cards. Still, they will have to find a way to give their teenagers easy access to funds in case of emergency. There is also the problem of helping their teenagers learn about financial responsibility.

Credit cards are not the only game in town when it comes to card payment convenience. One particularly popular option is debit cards. The good thing with debit cards is that payments are not taken as a short term loan but are taken against an existing deposit. That eliminates the risk of incurring debt. However, there are a few problematic details. Most debit cards allow card holders to overdraw which brings the problem of high overdraw fees. There is also less fraud protection with debit cards compared to credit cards and the rewards programs are anemic at best.

There will also be some parents who will reason out that it is better to get their kids credit cards as early as possible so that they can learn how to
manage their credit properly at an early age. This is naturally the approach that credit card companies would like parents to use.

Allowing teenagers to get credit cards early carries a lot of risks but it can be argued that the earlier they are exposed to it, the earlier they learn how to manage it. In such cases, the parents will need to keep a close watch on the credit card spending of their teenagers to correct any irresponsible spending. Allowing teenagers to get credit cards early also has the advantage of helping them build up a good credit score which can be very useful for them later on.

Consumers are going to find a lot to be happy for with the new Credit CARD Act. Consumers who are parents are going to find even more. With the new Credit CARD Act, regulators made special effort in introducing legislations meant to protect teenage credit card holders.

Government regulators have been worried over the high amount of debt among teenage credit card holders which are commonly composed of college students. Credit card companies market credit cards to students heavily, knowing that a lot of them are not very well versed with managing their credit responsible and that, when payments go overdue, their parents are likely to step. This has made for lucrative business for credit card holders while giving many parents with debt ridden students a considerable headache.

With the new regulations, credit card companies can no longer market their credit cards to students as aggressively as they used to. Without the law, credit card companies could easily set up booths in campus and offer t-shirts and other freebies in exchange for a credit card application. With the law, that is no longer allowed. Credit card companies will have to market their credit cards somewhere else. Besides, credit card approval for applicants below 21 years old is also going to get a lot tougher.

The new credit card legislation dictates that, for a person under 21 years of age to qualify for a credit card, he or she must either prove to have a reliable and appropriate income to cover any credit card debts or he or she must have a co-signer for his or her application.

Parents are usually going to be the ones who will be doing the co-signing for when a student applies for a credit card. This gives them a lot more control over their children’s credit card usage than previously. With this in place, parents can prevent their children from getting into credit card debt by not letting them have a credit card in the first place.

Of course, parents must realize that teenagers will have to learn how to responsibly handle their finances sooner or later. While credit cards do provide a good way to do so, the risk of getting into serious debt is just too high. It will be up to the parents to find a way for their teenagers to learn how to handle money without getting into debt and this is of utmost importance as fiscal responsibility is one life skill that cannot be simply taught in the classroom but must be learned from life experience.

It is no secret that consumer satisfactions of credit card companies are at an all time law. Credit cards, as useful and convenient as they are, have become quite unattractive among consumers. A lot of that is due to the fact that credit card companies have been busy introducing credit card terms – most of which are not very consumer-friendly – ever since the Credit CARD Act became law.

Now, many consumers are opting to get rid of their credit cards altogether. According to the Federal Reserve, credit card debt – represented by revolving credit – has begun to drop. In November, revolving credit dropped by 20% which is the largest drop ever recorded. According to Experian, the number of new credit card accounts through October dropped by 48% as well, compared to the figures during the same period of 2008. These are most likely being induced by the slowdown in credit usage among consumers, though tightened lending standards among financial institutions may also be a factor.

There are many reasons why consumers want to get rid of their credit cards. Some of these just want a simpler lifestyle for themselves, others are finding that alternative products to credit cards fill their plastic payment needs. There are also others who find what credit card companies have been doing to consumers as outrageous.

For those wanting a simpler lifestyle, they see credit cards as temptation which can potentially ruin their finances. Without credit cards, they find that they can better handle their finances and control their spending.

Debit cards have also become quite popular among consumers who want to get rid of their credit cards. It used to be that, if a consumer wanted to avoid credit cards, he or she could only either pay with cash or write a check. Now, debit cards are fitting the bill quite nicely. According to Auriemma Consulting Group’s survey last July of 2009, 28% of consumers had moved to debit cards.

Consumers who find the practices of credit card companies as outrageous make up for a considerable portion of those who want out with credit card usage. There is good reason why they feel that way. Since the new credit card regulations got signed into law, credit card companies have aggressively changed their credit card terms to get ahead of the law. Card holders have seen fees and interest rates hiked to record levels. This is true even for card holders who managed their credit card debts well. Credit card companies also cut down a lot of consumer’s available credit, putting many consumers already in financial trouble in a tight spot.

Credit card holders are going to get several surprises with their credit card terms this month when the Credit CARD Act goes live on February 22.

The Credit CARD Act came out of Congress early last year and was immediately signed by President Obama. Basically, it is a set of legislation designed to protect the interests of consumers in the credit card industry. Practices in the credit card industry such as double billing, universal default and issuing credit cards with expensive terms to subprime consumers left a lot of consumers with high credit card debt and an overwhelming payment default trend which almost brought many of the major credit card companies to bankruptcy.

With the new credit card rules about to activate, credit card holders would do well to find out for themselves just what this will mean for them. For those who expect the credit industry to become safer and much less costly for them is going to be greatly disappointed. Credit card companies are not simply going to give up and give in. Already, consumers are seeing new credit card terms intended to either circumvent or to make up for losses being forced by the new credit card laws. For a consumer, the new term changes in their credit cards can be confusing. However, confusing or not, they still have to keep up with the changes to keep themselves from getting hit by nasty credit card term surprises.

Perhaps one of the most awaited changes consumers expect with the new credit card bill is the way credit card companies raise their interest rates. The good news is that, with the new rules, credit card holders won’t be seeing arbitrary interest rate changes. For new card holders, they can expect their interest rates to stay the same for one year. For those with preexisting credit cards, their interest rates won’t go up unless they miss their payments for sixty days.

Another common concern among consumers is universal default. Universal default is when a card holder’s interest rate gets hiked because they missed payment on an unrelated billing such as on a utility or mortgage bill. This will no longer be allowed with the new rules in place, fortunately.

Credit card holders are also going to get the privilege of choosing whether to be allowed to charge over their limits or not with the new credit card law in place. Overcharge fees, the consequence of charging over a credit card’s limit, is one of the most expensive fees that a card holder sees and, with the new law, it will be an avoidable “expensive fee”.

Come February 22 of 2010, the bulk of a new set of legislations specifically made for the credit card industry is going to activate. It is called the Credit CARD Act and it is going to change the way teenagers access credit cards.

Teenage credit card holders have long been one of the most lucrative markets for credit card companies. Proof of this is the massive marketing credit card companies hold – or used to hold – during school openings to encourage teenagers to sign up for a credit card. Unfortunately, a lot of teenagers are not very well acquainted with the concept of financial responsibility resulting in an alarming rise in teenagers with large credit card debts. The trend greatly worried government regulators which is why a portion of the Credit CARD Act is specifically targeted at enforcing financial responsibility among teenage credit card holders.

How does the law do that? Simple, by keeping credit cards out of reach from teenagers who are not financially responsible.

Specifically, the new law will not allow credit card companies to sign up credit card holders who are below 21 years of age if they do not have the following requirements: a co-signer or proof that they have enough income to pay off their credit card bills.

Talking about co-signers, a co-signer is a person above 21 years of age who can vouch for the teenage credit card applicant. This is usually the parent or guardian of the applicant. Once the co-signer signs for a teenager’s credit card, he or she becomes liable for any charges and bills that the teenager does not pay. That should keep co-signers wary of signing for a teenager unless they are sure that he or she is financially responsible.

For teenagers who are already generating their own income, getting a credit card is a lot easier. All they have to do is to prove that they have the income to pay off their credit card debts. This requirement assumes that teenagers who are able to maintain regular income are responsible financially, which is a good bet to take.

What is unfortunate for teenagers with the new law is that credit cards are going to be much more difficult to get and getting one will most likely involve their parents looking over their shoulders – so to speak – whenever they make a credit card purchase. There are, of course, options available for teenagers who want the convenience of credit card payment but can’t get one such as debit cards or secured credit cards.