Eight Most Important Credit Card Changes

NEW YORK ( TheStreet) -- Major provisions of the CARD Act, which was signed into law in May, take effect Feb. 22. However, the credit card industry has changed dramatically since then. Issuers have reacted to a rough economy and the stricter law by finding new ways to increase revenue.

Companies have raised interest rates, closed accounts, increased fees and decreased reward programs. The number of people who will be hurt by the new changes outnumber those who benefitted.

Here are the major provisions of the CARD Act:

1. There will be new rules for interest rates. Issuers cannot increase rates during the first 12 months of a new account. On existing accounts, if your rate is increased, the new annual percentage rate (APR) only applies to your new purchases; your existing balance is still charged the old interest rate. (There are some exceptions on both of those provisions: if the card has a variable rate and the index goes up; if the introductory period ends and the rate increases to the standard rate; the payment is more than 60 days late; payments fall behind in the debt-management plan.) Any monthly payments above the minimum amount must be applied to the balance with the highest APR first.

2. There will be protections for underage consumers. If you are under 21, you will have to prove you are able to make payments or you will need a cosigner to open a credit card account. Issuers are also prohibited from offering free gifts to young adults as inducements for signing up for a credit card.

3. Over-the-limit fees are banned unless consumers give issuers permission to allow the transactions that put you over your credit limit. If consumers do not "opt in," then issuers cannot charge you this fee and your transaction may not go through.

4. Your statement must clearly explain how long it will take to pay your balance if you only make minimum payments. It must also tell you how much you need to pay each month to eliminate your balance in three years.

5. There will be caps on high-fee cards. If your credit card company requires you to pay fees (such as an annual fee, processing fee or application fee), those fees cannot total more than 25% of the initial credit limit. This limit does not apply to penalty fees such as those for late payments.

6. There will be changes and standardizations for billing and payments. Your due date should be the same date each month and the payment cut-off time must be 5 p.m. or later on the due date. If your due date is on a weekend or holiday when the company does not process payments, you will have until the following business day to pay.

7. Two-cycle billing will be eliminated. Credit card companies can only impose interest charges on balances in the current billing cycle.

8. Universal default is now prohibited. Issuers can no longer increase a cardholder's APR based on their payment records with unrelated accounts, like a utility bill.

In addition to those provisions, there are several rules that went into effect last August:

1. Your issuer must send your credit card bill at least 21 days (rather than 14 days) before your payment is due.

2. Your credit card company must give you 45 days' notice (rather than 15 days) when it plans to increase your interest rate or certain fees (annual fee, cash advance fee, late fee).

3. If an issuer increases your interest rate, you have the right to "opt out" of that increase. You can no longer make any new purchases with that card, but you can continue to pay off your balance at the existing (lower) interest rate for up to five years.
Bill Hardekopf is the chief executive officer of LowCards.com, which compares and rates more than 1,000 credit cards. He is the co-author of "The Credit Card Guidebook."