Suburban experts give advice when dealing with the new credit card age

Raymond Wright Jr. of Palatine received notices from all of his credit card companies, each containing several pages of very small print that only a lawyer could decipher.

"I did not elect to go over my limit and get charged $39," said Wright, a member of the Daily Herald's panel on business issues. "Instead, I told them to deny my credit card purchase if that happened. Why should I pay them to go over my limit? I should not go over it anyway."

Suburban consumers were likely scratching their heads on Monday when the Credit Card Accountability Responsibility and Disclosure Act went into effect.

The new federal law aims to protect consumers who use credit cards and force the credit firms to be upfront about their fees and interest rates. Instead, the law likely has forced up annual interest rates, added new fees for annual membership or even inactivity.

Lynda W. Reilly of Naperville, another member of the Daily Herald panel, said she has seen the impact of credit card company fees.

"I received a letter stating that because of not using my card, the interest rate was increased to 17 percent. That sure won't make me want to use that credit card," said Reilly.

"The credit card issuers have had nine months to prepare themselves for this legislation, and they have taken advantage of it," said Mark J. Gilbert, a certified public accountant with Reason Financial Advisors Inc. in Naperville and Northbrook.

The companies have made changes in these areas to replace lost income, which they perceive is a result of the Card Act. In the last nine months, they have raised rates (the average APR is now about 13.5 percent, up from 11.5 percent a year ago) and changed many fixed-rate cards to variable-rate cards, said Gilbert.

The Card Act, signed by President Obama last year and effective Monday, does not legislate maximum interest rates, nor does it apply to variable-interest rate cards. Experts said the new law also protects the consumer from any interest rate increase, at least for the first 12 months of a new account. The statements also will show how long it will take to pay off the debt if only the minimum is paid, and offers a breakout of the interest and fees paid.

"This is very helpful info and I believe it will be an eye-opener to most card users," said Gilbert.

So what should consumers do? Pay off the highest rate cards first, make at least minimum payments on all cards, and reduce spending that is beyond your means to pay. Try to use each card regularly in order to avoid inactivity fees, said Gilbert.

"At this time, I do not advocate completely closing accounts, because that has the effect of reducing one's available credit, which often results in a lower credit score," Gilbert said. "New credit is still more difficult to obtain than it was before the financial and economic crisis of 2008, so I recommend that consumers try to keep their available credit."

Also, start monitoring your credit regularly, check out your credit scores and credit reports, advised Mark La Spisa, co-founder of South Barrington-based Vermillion Financial Advisors Inc.

"Use credit cards for needs not wants, go back to what our parents use to say, 'If you can't pay it off when the statement comes in, then you should not be using the credit card," La Spisa said. "Obviously, emergencies like a car breakdown would be exceptions.

"Short of just using cash, which many cannot do during this tough economy, you may want just use debit cards and checks. But sometimes these are worse that credit cards (with) higher fees for those who tend to not know their balance and get hit with overdraft fees," said La Spisa.

Credit cards: What you can doIs the new Credit Card Accountability Responsibility and Disclosure Act really protecting consumers? The Illinois CPA Society recommends taking a few basic steps to protect against costly charges, fees and errors:bull; Read everything you receive from your credit card company, especially the "Terms and Conditions" section on your statement. bull; Carefully review your statement each month; check every line item, looking for charges and fees you don't recognize or that differ from your last statement.bull; Ask Questions. If there's a fee you don't recognize, or wording you don't understand in the fine print, ask for an explanation. bull; Consider calling the credit card company to see if you can get a better rate or special allowances for being a good customer.bull; Continue to be wary of special offers and rates. Variable rate cards which fluctuate with the prime rate are still available, and although marketing is restricted on college campuses, credit card companies may still offer freebies and enticements to potential customers.bull; Pay as much as you can each month to avoid high fees and penalties, and to protect your credit history. <script type="text/javascript" src="http://img.video.ap.org/inline/js/ga.js"></script><script type="text/javascript" src="http://img.video.ap.org/inline/js/qos.js"></script><script type="text/javascript" src="http://img.video.ap.org/inline/js/qos_mps.js"></script><script type="text/javascript" src="http://img.video.ap.org/inline/js/swfobject.js"></script><script type="text/javascript" src="http://img.video.ap.org/inline/js/util.js"></script><script type="text/javascript" src="http://img.video.ap.org/inline/js/inlineutil.js"></script><div id="commmanagerDiv"></div><div id="divPlayer">To view this site, you need to have Flash Player 8.0 or later installed. Click <a href='http://www.macromedia.com/go/getflashplayer/' target='_blank'>here</a> to get the latest Flash player.</div><script type="text/javascript">playerTitle = "Associated Press Video";playerFParam = "ILARL";playerCategory = "Editors Picks";directPID = "0222dvs_credit_card_changes";playerAuto = "false";playerPID = "PSlvHKIjOdolYsUhSjbpf7ROOkJP5EYR";embedInlinePlayer("commmanagerDiv", "divPlayer")</script>