Dear Credit Card Adviser,
I have heard that this new credit card bill will eliminate rewards programs that are currently on applicable cards. Is this true?

Also, how does this bill affect the consumers that pay their credit card bills in full each payment period, which currently (allows cardholders to) avoid any interest? I have heard that there will now be no interest-free periods. Is this true?

Lastly, will there be a requirement for all cardholders to pay an annual fee for owning a credit card?
— Jeff

Dear Jeff,
The new credit card law may bring about some negative consequences for people who pay their balances in full.

Issuers will be unable to raise rates on existing balances unless the cardholder misses the due date by at least 60 days. The restriction on interest rate hikes will cause the issuers to lose $10 billion per year in pretax income, says Robert Hammer, CEO of bank card advisory firm R.K. Hammer, in Thousand Oaks, Calif.

To make up that shortfall, issuers can, and likely will, make a host of changes not addressed by the legislation. Experts predict issuers may charge annual fees, increase interest rates and other fees, lower credit limits, scale back rewards programs and even reduce grace periods. Hammer thinks grace periods will shrink from their 20-day average and eventually disappear. That means interest would accrue as soon as you made a purchase.

Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, a national trade association made up of banking, securities and insurance firms, agrees that interest-free periods could shorten but called their end unlikely.

If banks do kill the grace period, they will remove a big reason for so-called “deadbeats” — people who don’t carry balances — to use credit cards. Without any float time, this segment of cardholders may switch to other payment options, such as cash and rewards debit cards.

Whether you believe the gloomier or rosier prediction on grace periods, anyone with a credit card will feel the effects of the new law. “Even consumers with good credit are going to see lower credit limits, higher rates and less attractive promotions,” says Bankrate Senior Financial Analyst Greg McBride.

As for annual fees, each institution will make its own decision whether to impose a yearly charge across the board.

Forecasts aside, how credit card companies exploit the loopholes in the new law remains to be seen. For now, keep statement balances low, spend your rewards points and charge a small amount on unused cards once a quarter to keep them active. And watch your mail for change-in-terms notices.

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