Don't get bitten by credit-card changes

Come February, credit-card rules will become a lot more consumer friendly. In the meantime, watch out.

"Card companies are trying to come up with a number of ways to make up for the revenue they expect to lose and also minimize their financial risks in light of rising card-delinquency and default rates," says Bill Hardekopf, CEO of LowCards.com, a site that helps consumers evaluate credit cards. Here's what you might see:

Higher interest rates and payments

Variable rates are replacing fixed rates, and both types may be rising. In mid-June, Karl Wilcox of Winder, Ga., heard that the rate on his Chase credit card was jumping from 5.99 percent to 12.99 percent. Then Chase told his wife, Janice, that keeping her card's 3.99 percent rate, supposed to be good for the life of the balance, would require a minimum monthly payment of 5 percent of the balance, not 2 percent, boosting her monthly payment from almost $200 to about $450. The Wilcoxes agreed to close their accounts for new purchases and pay off the balances under the old terms. "We've been good customers for at least six years," Janice says, "and they couldn't really give us any reason for the changes."

More fees

Bank of America, for example, raised its balance-transfer fees from 3 percent to 4 percent and upped its cash-advance fees to 5 percent. Wells Fargo Financial added a 3 percent balance-transfer fee and a $35 annual fee to its Cash on Demand card.

Reduced credit limits

Some limits have been halved. If you're carrying a $4,000 balance on a card with a $10,000 limit, a cut to $5,000 means you're suddenly using 80 percent of your available credit, which is likely to lower your credit score. That can hike interest rates available to you on other cards and loans.

Bottom line

Keep balances low to reduce the impact of any adverse changes in terms. If changes are too unfavorable, decide whether it pays to follow the lead of Donald Costello, a retired U.S. Air Force officer from New Orleans. HSBC cut the credit limit on his Visa card from $20,000 to $300, then told him it would raise the limit to $5,000 if he charged more. He told the representative that the next sound she heard would convey his response. "She asked what was that clicking sound," Costello says, "and I told her it was my scissors cutting up HSBC's card."