credit cards

6 smart credit card moves now

Infrequent card use may also trigger a fee. Fifth Third Bank now charges a $19 inactivity fee if the card hasn't been used in a year.

In short, brace yourself for more fees. "We're continually expecting more offers to charge a fee to get the same type of rewards or the better APR rates," says Shahani. "Given all the legislation that has come into play, issuers have no choice but to start charging some fees because they have to make their money in some way."

Smart move: When shopping for a new card, take note of fees you would encounter based on typical usage.

“Issuers have no choice but to start charging some fees because they have to make their money in some way.”

4. Lower credit limits

A new study from credit score developer FICO found that nearly 33 million cardholders saw their available credit slashed between October 2008 and April 2009, up from 25 million who experienced a reduction between April 2008 and October 2008. Credit lines were cut for 24 million in this group that hadn't increased their credit risk.

FICO maintains that lowered credit limits and account closures are not causing widespread score drops. Only 8.5 million whose credit reports didn't trigger limit decreases saw a drop in their score, typically of less than 20 points. The median score for this group was a 760 FICO.

In addition, credit limits are down slightly from a year ago. The average credit limit for new accounts is $4,594, compared with $4,747 in 2008, according to data from Equifax, one of the major credit reporting agencies.

Smart move: Check your credit limit on your statement each month; the CARD Act does not require issuers to tell you in advance about cuts to your credit limit.

If your credit limit is downsized, make sure to pay down your balance. A reduction in credit limit won't by itself lower your credit score, but a high balance-to-limit ratio can sink your credit rating.

5. Fewer fixed-rate cards

Only five out of 39 credit cards surveyed in 2009 had a fixed rate, down from 13 of 39 a year ago, according to Consumer Action.

At the same time, none of the credit card offers mailed in the second quarter carried fixed interest rates, according to Synovate Mail Monitor.

Variable rates fluctuate according to an index, usually the prime rate. Under the new law, rate hikes pegged to index changes do not require 45 days' advance notification. These rate increases can apply to existing balances.

Smart move: The rate itself is more important than whether it is fixed or variable. Find a card with a low-interest rate if you carry a balance.

6. Premium for premium rewards

"We're kind of seeing a fee structure emerging in terms of rewards where you have an option to choose the better rewards product at a fee or settle for the lower rewards product, which may be without a fee or with a minor fee," says Shahani.

He gives the example of the Hilton HHonors Surpass Card from American Express. One of the perks not offered on the regular Hilton HHonors card is a nine-point bonus for every dollar spent at participating Hilton hotels, instead of six. The Surpass Card comes with a $75 annual fee.

From November through May 2009, Chase offered Freedom cardholders the option of paying a $30 annual fee to access a 3 percent bonus in certain spending categories. Spokeswoman Laura Rossi at Chase cited the CARD Act as the reason for killing the offer.

The law doesn't limit annual fees, but does require issuers to give 45 days' advance notice before installing a new or increased fee.

Smart move: Do the math to see if the rewards outweigh the cost of the annual fee, based on your typical monthly spend. If you carry a balance, focus more on the interest rate rather than the rewards.

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Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.

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