Last week, the Office of Thrift Supervision, the Federal Reserve, and the National Credit Union Administration gave the American people a huge Christmas present, albeit one that we won’t be able to open until 2010.

These three offices of commerce have decided that credit card companies are participating in “unfair,” “unreasonable,” and “deceptive,” tactics when dealing with their customers. In light of these practices, they have inflicted a number of changes on the credit card companies, to take effect in July, 2010.

Upcoming Changes

Interest Rate Increases -  The new rules disallow card issuers’ to raise interest rates during the first year a card is issued, and all but bans issuers from retroactively changing a cardholder’s interest rate. This also applies to the penalties for late payments.

Additionally, any interest rate increases can only effect purchases from the point in time the rate was increased! This means that if you’re carrying a balance, and the interest rate increases, it doesn’t affect the balance currently on the card. A VAST improvement over current practices.

Billing Periods – Card issuers must now allow at least 21 days for payment (no ‘immediate’ interest calculations, and any due date that falls on a weekend is moved to the next business day) . Also, the changes  eliminate double-cycle billing (the practice of averaging interest charged over the previous two months’ purchases. Causing some consumers to pay interest, even if they have a zero balance on their card.)

Payments Applied to All Interest Rates Proportionally – As many are familiar with, credit card companies currently apply any payments received to any balances with lower interest rates (as is the case with so-called Introductory Rates) causing them to accrue higher interest payments by ‘trapping’ high interest debt ‘underneath’ lower interest rate debt. This practice has been changed, and now all payments are applied to 
all interest types proportionally.

Any Improvement is an Improvement

This isn’t going to prevent the credit card companies from trying to make as much money as they can before these new rules go into force. There’s about 18 months before any of these new requirements come into effect. It should help the American consumer by putting a little more money back into their pockets that would otherwise flow out of the household.

While many in government saw this as a positive thing, there are still others that believe more needs to be done to help the consumer. For instance, none of these changes even touch the over-the-limit and late penalty fees. Still, a step forward is a step forward.

Wait for the Unintended Consequences

Unfortunately, in the adverse economic conditions we’re in, the credit card companies aren’t immune to losing money. More people are defaulting on their credit cards, and at an accelerating rate. Some of the steps card companies have already taken is to start raising interest rates, and cutting back on consumer’s lines of credit, or canceling accounts entirely. Getting new credit is becoming more difficult, and that means that those with lower credit scores are going to see less and less of the ‘low interest rate’ card offers coming out.

Card companies also have incentive now (and a deadline) to try to make as much extra income as they can, before the new rules go into effect. Don’t be surprised if they come up with new and innovative (to them) ways to separate you from your money before the July 2010 deadline.

Credit is a tool, just like a stick of dynamite or a chainsaw. Powerful, but able to do lots of damage if used wrong. Know how to use it wisely.