Fixing Credit Cards

Our View: Predatory Practices Of Banks And Other Card Issuers Should Be Ended

Even as a growing number of people can't pay their credit card bills, major banks are jacking up interest rates and clamping down on credit limits. But two new bills in Congress are taking aim at what many consider credit card abuses, and legislators should act quickly to make them law.

The House and Senate bills would prohibit banks from raising interest rates on existing balances, something banks and credit card companies have been doing with increasing frequency. The legislation also addresses marketing cards to people who can't afford them, such as college students or those under 18 years of age. Charging fees for making card payments over the telephone and charging fees without clearly explaining them first would also be outlawed.

White House economic adviser Lawrence Summers is scheduled to meet with the heads of several of the largest U.S. credit card issuers at the White House on Thursday. He has already signaled where the administration stands on abusive credit card rates and leveling the field for consumers: President Barack Obama is willing to sign a "credit card bill of rights" if it is passed by Congress.

The Federal Reserve adopted similar rules to crack down on card abuse back in 2008 but gave banks until June of next year to comply. The bills pending in Congress would give banks only about nine months to end abusive practices and begin following the rules. The sooner new rules go into effect, the better.

In the meantime, credit card users should be their own advocates and protect themselves. For most users, that starts with paying down card debt. If you have some money in a savings account where you're getting 3 percent and you have a credit card that you are paying 20 percent on, that's a losing proposition.

Consumers should search for credit cards that guarantee lower interest rates or apply for a low-interest loan to pay off card debt entirely. And mail from credit card companies should be read carefully with an eye for any changes in terms. Customers with good credit can always call the bank and ask for a lower rate, especially if they have received a better offer.