Basic credit card reform

Credit card reform is on the way. The reforms are to protect consumers from the abuses that take place now from credit card companies. Basically the credit card companies can raise interest rates, minimum payment amounts, or any terms of the contract at any time, but with the new laws enacted the credit card companies will be required to give written notice.

Channel3000.com:

The Credit Card Act of 2009 is being hailed as the largest reform ever imposed on the credit card industry, and the move is meant to increase consumer protection -- but it could also have some negative effects for those with good credit.

In the current fast-paced world fraught with economic challenges, paper or plastic has taken on a whole new meaning. More and more people are relying on plastic for their purchases, but credit cards as we know them today are undergoing a big change.

"It's going to be a different playing field," said Michael Johnson, finance instructor at Madison Area Technical College. "It's not going to be quite as easy to get into trouble as it has been in the past."

The Credit Card Act of 2009 is 33 pages of very complicated material, but it is full of important information for those who use credit cards. For example, under the legislation, 18 to 20 year olds will no longer be able to get a credit card without a co-signer.

Another change aimed at protecting consumers adds the right of the cardholder to reject an interest rate hike.

Starting in February, when the legislation takes effect, credit card companies must inform you in writing that they're going to increase your rate -- and you can say no. The rejection would close your account, but would still allow you to continue paying off the balance at the current interest rate.Another thing that will change is how credit card companies apply your monthly payments to your credit card balance.

Unfortunately, the credit card companies have already taken preemptive action to get around those new laws. Specifically, they have already raised interest rates and payments, and changed fixed rate to variable interest rates.

Credit card limit reductions and cancellations

If you have a perfect credit history and received a notice from your credit card company detailing information of a credit card reduction or cancellation of your card, then there is no need to panic. This is just the economy squeezing the credit card companies to take action to maximize profits and reduce liability. Unfortunately, you have become the victim of the economic downturn.

Not too long ago, the banks and credit card companies would look at your overall financial picture. They would take into consideration your employment and how long you have worked there, your income and how steady it is, and your payment history through credit reports or your FICO score. Now, they are under such great pressure to stay above water, that if you live in the wrong zip code or shop at the wrong place, then your credit card is adjusted.

Philly.com:

According to FICO's study, card issuers sliced credit limits for an estimated 33 million U.S. card holders between October and April.

An estimated 24 million consumers saw their credit limits reduced despite the absence of any new "risk triggers" during the study period. Those card holders generally had low balances, didn't use up a lot of their available credit, had very few - if any - reports of missed payments, and had a long credit history.

About one-third of the group, or 8.5 million, saw their credit scores drop after their limits were cut, typically less than 20 points, FICO said.

The cuts had "negligible impact" on the scores of about 3.5 million people, and 12 million consumers saw score increases.