Credit card laws are changing banking practices as many credit card issuers switch cards to variable rates. New credit card laws are requiring credit card issuers to alert consumers of any change in interest rates days before the change takes effect. The law doesn’t apply to variable rate cards however.Variable rate cards mean that the interest rate on the credit card is related to the Prime Rate. As the Prime Rate changes the interest rate on the credit card will change as well. A fixed rate card is less reactive to changes in the Prime Rate, and usually changes in reaction to consumer credit spending habits.Some financial analysts see the switch to variable rate cards as the credit industry’s way to skirt the new credit laws. The Prime Rate is currently near zero so credit issures are offering consumers a variable rate card with a current zero percent interest rate. But as the Prime Rate rises consumers will see a change that some won’t be expecting.According to Josh Frank, a senior research at the Center for Responsible Lending, “a lot of people are trapped” by the variable rate cards. They are nearly guaranteed a change in interest rates but may not realize it when taking advantage of a low rate offer.Banks and Credit card issuers defend the action as the best way to continue to provide credit toconsumers.The new rates will enable us to continue to extend credit to credit-worthy customers while remaining prudent in our lending practices, Betty Riess, Bank of America Spokeswoman, said.It's always been a good idea to pay down the balance on your card. Now it's critical: The higher your balance, the more risky you appear to banks.Curtis Arnold, founder of CardRatings.com, which tracks the credit card industry, suggests keeping your credit utilization ratio the percentage of the credit limit that you use to less than percent. Anything higher and "you are more likely to have a target on your back," he said.But don't wipe out your cash savings to pay down the cards, Detweiler said, in case you need something to fall back on.Use your cardsIf you don't use a card regularly, the bank is more likely to close the account. Banks have to hold a certain percentage of capital, or cash, on reserve for the loans they make, which can be costly if customers default on bills. So by closing accounts, banks reduce their capital need.A closed credit card account can hurt your credit score . That's because percent of your credit score, the rating system most lenders use, is based on your credit utilization ratio and length of your credit history. Closing an account cuts into both. "You need to use at least once every six months," Arnold said.Monitor your accountsBanks are reviewing customer accounts more aggressively today.Make sure you do too. Read statements and other mailings as soon as they arrive or click on links to "important messages or announcements" online.Starting next month, banks by law must provide days' notice of a change in your interest rate. You can "opt out" of a rate hike and pay off your balance at the existing rate in the day period, and you have to stop using your card.Sign up for automatic account alerts to your cell phone, which notify you when, say, you get close to your credit limit or a payment is due. That way, "you'll have some warning" if your account's been changed, Detweiler said.Credit cards have always been fickle. But as banks struggle to make up for losses, including a record number of credit card defaults, even the best cardholders face penalties.A large part of this is economics," said Gerri Detweiler, a credit adviser for Credit.com, a consumer advocacy group. "Banks have got to try to bring in money to offset the increasing defaults."NewsCenter 5's David Brown reported that they are unregulated credit cards fees charged to store owners for every credit and debit card transaction. It's a hidden fee that is eventually passed on to the consumer.For 35 years, Dennis Lane has owned a Eleven on Adams Street in Quincy. Lane said credit card companies are taking a big portion from each credit card purchase and that has spurred him into action.Roughly percent of the cost of each purchase is eaten up by the fee.An in-store petition is asking for customers' help. It asks Congress to regulate the interchange fee a fee that Lane said has skyrocketed in recent years."We believe that the escalation of fees has been extreme and unreasonable, and we believe as responsible retailers should have an opportunity to negotiate those fees," Lane said.According to the Electronics Payments Coalition, the payments to credit card companies have jumped percent since Elevens paid million to credit card companies for transactions. In , the fee was million.Lane said by regulating the fee, the consumer would be paying less."We could reduce those fees and lower the overall cost of goods the cost of doing business as a responsible retailer we would pass the savings on to the consumer," Lane said.Customers are eagerly signing up, happy to get rid of extra fees."There are so many of them that are not explained. It just seems senseless. It's like when you are paying points to the bank and just wondering where is that going?" customer John Parsons said.At Eleven stores across the country, more than 1 million people have signed the petition. They hope to have million by Aug. The petitions will be delivered to Congress.Copyright TheBostonChannel.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.is a card that has value stored on a computer chip on the card itself stored value card or in a central database. Unlike a or debit card, it is not linked to an account or a specific person. It is not a credit card. You "load" the card with funds and then draw down the balance each time you use the card.A gift card is a common form of prepaid card that can be used only for a specific merchant. Prepaid calling cards are another example. Prepaid cards that are branded with the Visa or MasterCard logo can be used anywhere debit cards from those networks can be used. These cards are also called "teen cards" since so many parents give these cards to their children instead of cash.
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