by Joseph Kenny | 03/1/10

After months of anticipation, the new Credit CARD law finally became effective on 22-February-2010. There has been a lot of talk about the effect this law will have on consumers, and now it is time to find out. This law will probably eliminate billions of dollars in credit card revenues, and the credit card companies are fighting back by implementing new and unusual fees on consumer accounts.

Though you should always peruse your credit card statement details carefully, it is even more important now. The new law adds many restrictions on credit card companies as far as when they can raise interest rates and add new fees.

Once the legislation was passed, the credit card companies got busy adding new fees and raising rates before the law became effective. With the passage of the law, the restrictions are now in place, though there are no limits on how high interest rates or fees can go.

Consumers will now discover that their credit card statements explain how long it will take to pay off the account balance if minimum payments are made. That is going to be a shock to many consumers.  In addition, interest rate increases can only be applied against new purchases going forward from the date of the increase, and not on existing balances. There are other rules, but those two will probably have the most impact on both consumers and credit card companies.

The estimated cost to the credit card companies is expected to exceed $12 billion in lost revenue. One of the interesting problems with this new law is that it becomes effective at a time the economy is struggling to find footing. The hit on the credit card companies’ revenues could impact consumers in new ways.  The revenue reductions are compounded by rising payment default rates and declining card balances.

Even when not taking into account the impact on the economy, consumers can expect to see a number of new fees on their credit card accounts. There will be annual fees, balance transfer fees, overseas transaction fees, late payment fees, and many others.

Credit card balances have been declining and at the end of 2009 the average balance was $5,400.  The interest rates have increased by 2 percent on credit card accounts since the passage of the new law.

It was not all the long ago that credit card companies were sending out pre-approved card notices by the millions. It seemed line anyone could get a credit card. Those days are over so credit card companies are looking to their timely payers for more fee payments to make up for lost revenue. It remains to be seen whether the good payers will continue business as usual.

One of the interesting facts about the Credit Care Accountability Responsibility and Disclosure Act of 2009 is that banks are still free to raise interest rates as high as they want. The new law simply changes the timing of rate increases. Interest rates can be raised after a consumer has been given 45 days notice of the increase.

The full impact of the new law will not be known for many months. But one thing you can be assured of – the credit card companies are working diligently to find new ways to recover anticipated lost revenue. Consumers are wise to look carefully at the details on their credit card accounts.