If you use a credit card, a regular history of paying your bills on time and not running up high balances should net you a good payment history and good credit terms, right? Wrong. According to a new survey released by Consumer Action, certain bank practices can ensnare even good customers in a web of late fees, penalties, and higher interest rates.

Consumer Action's "2008 Credit Card Survey," released July 22, studied 22 card issuers and 41 different credit cards to compile its results. The survey's findings indicated that the top five card issuers--Bank of America, Chase, Citi, American Express and Capital One--"write themselves a blank check to change rates," said Consumer Action's Linda Sherry.

One of the major new reasons for interest rate changes was "market conditions," the survey found. Several of the banks surveyed cited the worsening economy and credit availability as justification for hiking rates or charging additional fees. "What this means to even the best customers is that a perfect payment history is not a safeguard," said Sherry.

"Consumers should not need a crystal ball when they enter a contract," Sherry said. "When cardholders accept the offered price they don't know how 'market conditions' will impact the cost of carrying a balance that they took on at a much lower interest rate."

Among the survey's findings:

• American Express, First Command, US Bank, Washington Mutual and Wells Fargo said that they would reduce cardholders' credit limits because of perceived customer risk, such as high balances on credit cards, late payments, or lower credit scores.

• Once a cardholder's interest rates are raised, it's often difficult to return to the original lower rate. A majority of issuers told Consumer Action that cardholders would have to contact the bank and ask for an account review to qualify for a lower rate, while many required six months to a year's worth of good payment history before considering a rate change.

• 87 percent of the card issuers surveyed included binding arbitration clauses in their card agreements as well. Five of the twenty-two lenders surveyed said that they permit cardholders to "opt out" of the binding arbitration provision of the cardholder agreement, but only within a specifc defined period of time.

• Many large financial institutions have begun using a practice termed "in-house universal default," where a customer who has multiple accounts with the same institution can be hit with a card rate increase if they bounce a check or miss a mortgage payment.

Tightening the screws

As the economy falters and Wall Street struggles with the fallout of the housing market, many banks and lenders have been aggressively cutting credit lines while hiking fees, interest rates, and penalties in order to maintain their financial cushion of liquidity. The upshot for consumers is that they have less access to credit than ever, at a time when rising prices and stagnant wages means they may need it the most.

Members of Congress have introduced multiple pieces of legislation that would reform or restrict the more abusive practices of the credit card industry, from eliminating unwarranted interest rate hikes to enabling merchants to negotiate the price of credit card interchange fees.

The Federal Reserve has also opened public comment on its plans to reform lending agreements and procedures to prevent deceptive tactics. To date, the Fed has received over 30,000 comments from consumers on the issue, many of whom are asking for stronger rules.