December 18, 2008 New credit card rules adopted by regulators Play video

(Peter Howe, NECN) - As the time comes for the annual Christmas/Hanukkah credit card workout, consumers are being promised a little gift by federal financial regulators: a crackdown on some of the worst profit-gouging practices of charge card issuers. Two hundred and forty pages of new rules, taking effect in 18 months.

Federal Reserve chairman Ben S. Bernanke said: "Above all the rules seek to promote responsible use of credit cards through greater transparency of credit card pricing including the abolition of pricing practices that are deceptive or unfair."

Some of the new rules: No more raising interest rates on existing balances. Increased notice, from 15 to 45 days, before issuers are able to change card terms. A 21-day or "reasonable" payment deadline from the time the bill is mailed until it is due. And payments on accounts with multiple interest rates must be applied first to highest interest balances, not the lowest.

"Overall we think the provisions are good, they're a good start, but they didn't address all of the problems,'' said Chi Chi Wu of the National Consumer Law Center in Boston. She's happy credit-card issuers won't any more be able to suddenly jack up interest rates on debt that cardholders have already accrued, unless the cardholders are a month or more late paying their balance. "This is probably the most important change. This protects consumers who have already racked up significant balances ... If a consumer is in trouble, in financial

Ellsworth Adams, up from Falmouth, Mass., on Cape Cod for Christmas shopping at Downtown Crossing in Boston, said he once got whacked with a big interest jump, when the rate on his balance due went from about 4 or 5 percent to well over 15 percent. "It's just absolutely insane,'' Adams said. His solution? "I'm not using it. I'm not using it. Christmas is going to be very short this year. It's going to cash, cash only, that's it.''

Chris Williams of Lunenburg, Mass., said her policy is: "I use the credit card companies to get miles or money, and then I cut 'em up ... Make the purchase. Cut up the card. Pay the bill. And that's it.

Howe: The average American household is now carrying about $11,200 in credit card debt. That's up more than a third from just eight years ago.

Chi Chi Wu's main complaint is the rules don't change until the middle of 2010: "The American people really need the protection of these rules now basically.''