THE HELP DESK The Help Desk: Top Tips

Fighting credit card rate hikes

Many credit card companies still arbitrarily increase rates. Can Congress and the administration put an end to this practice?

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By Gerri Willis, CNN personal finance editor

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For more information on managing your largest investment, check out Gerri Willis' 'Home Rich,' now in bookstores.

NEW YORK (CNNMoney.com) -- President Obama has given lawmakers a deadline for credit card reform legislation. And today senators are working on a measure the president wants on his desk two weeks from today. But are credit card companies already starting to change their tune?

1. Tracking terms

A Web site called BillShrink.com tracks credit card terms. They've been analyzing how many credit card companies are already in compliance with the Credit card Bill of rights.

They found that since the Credit Card Bill of Rights was first voted on in Congress last December, credit cards have been adopting some consumer-friendly practices, but that they're ignoring practices that make them a lot of money, according to Samir Kothari of Billshrink.com.

For example, one of the most powerful acts of the bill includes protection from arbitrary rate hikes. But no issuers are in compliance yet.

The Credit Card Bill of Rights also states that consumers should get fair allocation of payments to different balance rates. Often the bank charges you multiple interest rates for different portions of your debt, (maybe you had a low introductory rate at first and then it went up.)

Most banks apply your payments to the lowest interest items first so the higher interest part of your debt lasts longer and they can earn more money off you. No credit card companies have stopped doing this yet, according to BillShrink.com

2. Some momentum

There is some good news here.

Many banks are beginning to comply with the less onerous rules, including giving more notice before interest rate increases go into effect and giving you the right to set your own credit limit, so you don't accidentally go over that limit and get hit with penalty fees.

For example, if your credit limit is $5,000, you can request to put a hard limit of $4,500. Your purchase may be denied, but you won't be hit the $40 fee. A few banks -- some big, some small -- have stopped double cycle billing. And even before the Credit Card Bill of Rights was voted on, a number of big banks dropped universal default policies.

3. Stay on top of changes

You want to keep on top of any mail you get from your credit card issuer. It may inform you of important changes to your account.

It's likely that the big revenue-makers for credit card companies like arbitrary rate hikes and lowest interest-first policies, will be the last thing to go.

"Credit card companies will only do this when it's required," says Kothari. Often when credit card companies change their terms you do have the ability to opt out of the changes, but that usually means you'll have to close the account.

And closing an account can hurt your credit score. If you can't pay the balance in full and if you can't do a balance transfer, you may want to consider opting out.

Got a financial dilemma? Go to cnnmoney.com/helpdesk to submit questions, read the Help Desk articles and check out new Help Desk videos. And tune in to CNN's Newsroom Tuesdays and Fridays, when Gerri Willis and other experts answer your questions. To top of page

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