Credit cards play a vital role in helping millions of Americans and small businesses to get by with daily life and daily business activities. For years consumers have been complaining about the unfair credit card practices and wanted a change. The new credit card law, which promises that consumers will be treated fairly and credit terms would be made easier to understand and not mislead consumers, should put an end to the frustration most consumers have had to deal with for years-at least for now.

As president Obama stated “The law is for people who found out those credit cards are a one-way street. It’s easy to get in but almost impossible to get out. We expect consumers to live within their means and pay what they owe,” the president said. So, the new law really doesn’t give consumers an easy pass, but rather warned consumers that they too have to live up to their end of the deal.

New Credit Card Law: In effect July 2010

The new credit card legislation, which takes effect in July 2010, will allow credit card companies to raise interest rates only on new credit cards and future purchases or advances, rather than on current balances.

How are Consumers Affected?

Due to the new law not being in effect immediately, credit card companies are using the window of opportunity between the law’s signing and its effective date to increase rates, cut back on credit card limits and possibly discontinuing your credit privileges.

Effects on Credit Card Lenders

According to a report by Reuters – The new legislation may have a much more dire effect on credit card lenders’ earnings than analysts had expected, and 2010 could be a brutal year for the companies.

Balance Restored Between Consumers and Credit Card Companies

U.S. Sen. Carl Levin, a Michigan Democrat who has been holding hearings on credit card abuses since 2007 stated that, “Credit card companies have crossed line after line with outrageous practices that hurt American families and businesses,” Levin said. “They underestimated the ability of Congress to turn public outcry into public policy. We faced powerful forces against this effort, but we prevailed. Millions of Americans will benefit now that some balance of power is being restored between cardholders and card issuers.”

Some Provisions of the Bill Include:

• Credit card issuers must give consumers 45 days notice if there is going to be an increase in your rates. They will also have to give you the opportunity to “opt out” of the rate increase and pay your existing balance under the old rate terms.
• Card issuers that violate the act can receive fines of up to $5000.
• Prohibiting over-limit fees unless consumers agree to allow transactions that exceed their credit limits to go through rather than be denied.
• All penalty fees must be related to the violation and reasonable for over-limit charges, late-payments or other penalty fees.
• Gift certificates and gift cards expiration date extended so they cannot expire within five years of activation.
• Anyone under the age of 21 has to show proof that they have the means to repay the debts or have a co-signer.
• Credit card issuers must send bills at least 21 days before the due date.
• Permission from parents or guardians is required for college students if they want to increase their credit limits on joint accounts they hold with those adults.
• Card issuers are required to disclose how long it would take to pay off credit card balances on monthly minimum payments or the amount required to pay off balances in 36 months.

How to Choose What is Just Right for You

When applying for credit cards, you should make sure they offer low fees, low APR (below 10%) and, most importantly, that they report your payments to the credit bureaus such as Equifax, Experian and Trans Union. If they report to the credit bureau, it is a good way to rebuild your credit so that in the future you can get regular credit cards with no application processing or annual fees.

What Kinds of Credit Cards are Available to People with Bad Credit?

There are a variety of credit cards to choose from for people with bad credit. You will definitely need to shop around and find the best possible deals. Due to poor credit, chances are you will not be able to get a regular, no annual fee credit card from regular credit card companies. However, there are many credit card lenders who specialize in people with bad credit and will issue credit cards but most, if not all, of those cards come with a fee that you should be aware of. Some are:

Annual Fee: A fee you pay annually, for the privilege of using the card.

One time Application/Processing Fee: A fee charged for application process, which can be as high as $100.

Monthly Fee: Many credit cards have a monthly processing fee, which can range $5-10.

Excessive Fee Due to Having Bad Credit

You may end up paying quite a bit in fees just to have the privilege of using a credit card but this is the price you have to pay when your credit is less than perfect. Having a credit card can be a lifesaver and comes in handy if you need to make a plane or hotel reservation or rent a car. It is also a way to rebuild your credit score if used responsibly. Once you have made your credit card payments on time and stay within your credit limit, you can then begin to establish new credit and get a regular no annual fee credit card.

Secured Credit Cards/Prepaid Credit Cards

A secured credit card or prepaid credit cards require a cash deposit. The cash deposit will be your available credit limit. For instance, if you make a deposit to your account in the amount of $200, that is your credit limit and you can only charge up to $200 on your account. You are also able to add more money to your account if you need a larger credit limit. Secured/Prepaid credit cards on the other hand, are an excellent choice because it prevents you from getting into more credit card debts. However, it will not help you to rebuild your credit history.

Unsecured Credit Cards

Unsecured credit cards do not have a security deposit linked to it. The higher your credit score, the higher your credit limit will be. Being able to get an unsecured credit card in the future should be your goal. All you need to do is keep a clean credit history from now on.