How new credit card rules affect consumers

(image from Flickr user Mike Reys (cc: by-nc-nd))

Consumers should expect increases in annual and other fees as banks and credit card companies change their rules to head off new restrictions.

The following is a partial transcript; for full story, listen to audio.

As predicted, banks and credit card companies are changing their rules ahead of new restrictions that are supposed to take effect next year.

Sandra Block, who writes about personal finance for "USA Today," says Bank of America will charge some cardholders an annual fee even if they pay off their balances every month.

"It could range from $39 to $99, and what has really gotten people upset is it could affect some of their best customers. Because in the credit card world, a good customer is sometimes the least profitable customer ... if you pay off your balance every month, and you're never late, you are basically not making  a lot of money for the credit card company."

Citigroup is looking at another kind of fee, according to Block. "They are going to start charging a fee of an unspecified amount to customers who charge less than a certain amount every year. And the amount that's been batted around is about $2,400 a year. So if you spend less than $2,400 a year on your credit card, you might be hit with a fee, basically for  just not spending enough."

Expect to also see an increase in "inactivity fees," says Block, for cards that aren't used over a period of time.

As the new restrictions in February will limit the ability of banks to raise interest rates, which will impact their revenues, banks argue that they need to look for other ways to make money.

While she says people should take stock of their credit cards, Block does caution those who are looking to close their credit card accounts. "Closing a credit card account ... could conceivably hurt your credit score. One of the things that is used in developing your credit score is the amount of credit you have versus the amount of credit you use. Now if you close a credit card account, then available credit is going to shrink and that could hurt your credit score."

She adds that people who pay off their balances every month, carry very little credit, or who are not planning to make a big purchase in the near future shouldn't be too concerned.

Overdraft fees are another way that banks are looking to raise revenue. While banks say this is a convenience they offer customers; customers are discovering that a $2 overdraft from their account could quickly turn into a $35 fee.

Regulators would like banks to inform customers when they don't have the required money in their account for a purchase and to offer people to opt-out of overdraft protection.

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