By Mark Huffman

January 4, 2010
The Credit Card Act of 2009 takes effect next month, but as consumers are all to aware, lenders spent the second half of last year getting ready for it, jacking up interest rates and closing thousands of accounts.

With the new rules expected to take billions of dollars from banks' bottom lines, industry experts say consumers can expect to face all sorts of new fees in the coming year.

"There are so many things that issuers can do that the Card Act doesn't touch," Bill Hardekopf, chief executive officer of, a Web site that tracks the industry, told the Wall Street Journal.

Hardekopf and other analysts expect banks to get creative this year, coming up with new fees for a batch of products and services. The industry, they say, has become much more reliant in recent years on fees, rather than on interest charges. To earn interest, banks have to loan money.

In the new credit environment, banks are more reluctant to make loans. In some cases, tighter lending standards have reduced the loans they can make.

For consumers, the new credit card rules will limit some interest rate hikes. Under the new law, banks have to give customers ample notice of a rate hike. They will no longer be able to raise rates on existing balances.

Damage Already Done

But for many existing customers, that is of little consolation. Most credit card companies have used the time between the Card Act's passage in May and its implementation date to do many of the things that will be prevented under the law. This did not go unnoticed in Congress.

"The abuses by some in the industry which led Congress to pass my original legislation seem to have only increased since the bill's signing," said Rep. Carolyn Maloney (D-NY) in November. "In fact, The Pew Charitable Trust reports that interest rates have spiked this year by an average of 20 percent on credit cards representing more than 91 percent of the $864 billion in outstanding credit card balances." has received thousands of complaints from credit card customers in the last six months. Christine, of Cheney, Wash., said Chase, in effect, forced her to cancel her credit card account.

"Basically, they upped the interest on my platinum card from 12 percent APR to 24 percent to 28 percent APR for absolutely no reason," she told

Christine said she was surprised at her treatment because she considered herself a good customer who always paid her bill on time. But with default rates rising in a bad economy and new rules set to reduce the amount of fees banks can collect, Chase and other banks took steps last year to reduce their loan portfolios and to make those smaller portfolios pay more. Many good customers ended up paying the price.

Crackdown On Overdraft Fees

Banks stand to take another hit on July 1 of this year when new Federal Reserve rules on bank overdraft fees take effect. Under the new rules, banks will be required to get customers' permission before giving them overdraft "protection" on their ATM withdrawals and debit card purchases.

It will change the present system in which banks automatically cover a customer's purchase when there are insufficient funds, but charge a $35 fee. Many consumers report being overdrawn by less than a dollar, triggering the hefty fee.

While the new rule is a major victory for consumers, it's a major setback for banks. According to Federal Reserve estimates, banks rake in $50 billion a year on overdraft and other service fees. So consumers shouldn't expect banks to suffer this financial setback without reacting.

Some banks and credit card issuers have begun charging fees for services that were once free, such as paper statements. Others have started scaling back their loyalty rewards programs.

Free Checking May Disappear

Free checking accounts could also become a thing of the past. In a 2008 study, the Federal Deposit Insurance Corporation reported that 75 percent of consumers with checking accounts paid nothing for it.

The other 25 percent, the study showed, paid minimum balance fees, overdraft fees and other service charges that subsidize free checking for the majority. You can expect banks to begin raising the threshold for free checking, so that 75 percent number gets smaller and the 25 percent number gets larger.

Banks are likely to come up with new products and services to offer their customers, all with some sort of fee attached. Tim Smith, CEO of Probity Financial Services, says banking has changed over the years, and the way financial institutions look at fees, is one of the biggest changes.

"In the past banks charged overdraft fees to punish and discourage their customers from overdrawing their accounts," Smith told last year. "At some point they realized this was a service they could provide and charge for."

That means consumers should stay alert in their dealings with financial institutions, from their local bank to their credit card companies. When banks offer new services and products, make sure you understand them completely, including their costs, before signing on.

Because in almost every case, there will be a cost.