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Article by Karen Blumenthal, Wall Street Journal Personal Finance

Here's some friendly year-end advice: Read those disclosure letters that banks and credit-card companies are sending you in coming months—or at least try really hard.

The text of these mailings may seem like gobbledygook. But they may require you to make important choices soon. Ignoring them could mean paying a lot more money to your credit-card company, having a credit card rejected or getting an unpleasant surprise at the ATM.

New legislation and Federal Reserve rules that go into effect in February and next summer will force banks and credit-card companies to give more notice of significant changes in card terms, limit some interest-rate hikes and require more detailed billing statements. But the rules will also require us to decide whether to opt in or out of rate increases and programs such as "overdraft protection" that we may have been automatically enrolled in previously.

The letters may be easy to miss, since some of them look like junk mail. And don't expect reader-friendly prose. The banks' approach is: "It's not our job to teach you the law; it's our job to comply with the law," says Adam Levin, co-founder and chairman of, a credit-information Web site.

When you open the envelopes, here are some details to look for and moves you may want to consider:

Is the credit-card's interest rate or annual fee changing? Many companies have been aggressively raising rates as high as 29.99%. But you now have the right to "opt out" of these changes before they become effective, essentially canceling the card for new purchases, though you can continue to pay off the balance at the old interest rate.

If you have an outstanding balance, this option especially matters right now because credit-card companies have a narrow window to hit you with higher interest rates. After the second round of the Credit Card Act goes into effect Feb. 22, the companies can raise rates on future transactions but not on your current balances unless you are at least 60 days behind in your payments. But until Feb. 22, any interest-rate increase can apply to both future purchases and current balances—which could mean substantially higher costs.

Has your credit limit been lowered? And do you borrow close to your limit? Starting in February, the new law will bar credit-card companies from charging fees (typically up to $39) for exceeding a credit cap unless the customer "opts in," or agrees to pay fees for the convenience of busting the limit. If you don't opt in, you run the risk that your credit card will be rejected when you near your limit. That could put those with small credit limits or high balances in an awkward position at the cash register. It also makes travel trickier since hotels and rental-car companies often put a hold on your card as a precaution, reducing your available credit.

To avoid rejection—and fees—set up email and text alerts to notify you when you're near your limit. Credit-card issuers and banks generally offer that option as part of their online service. Also, if you have the discipline, consider a second, back-up card.

Is the bank changing how it handles overdrafts on your debit card? New Fed rules that take effect this summer will bar banks from charging overdraft fees on debit transactions (but not checks or electronic transfers) unless you opt in. Banks will no doubt market their overdraft programs, which charge up to $35 per overdraft, as a convenience. But there are cheaper options.

Again, set up email and text alerts to tell you when your balance drops below a certain level. If you have good credit, you can apply for an overdraft line of credit, which kicks in when your checking account is empty. There's a fee, often $10, for any transaction, plus interest rates comparable to those of credit cards.

Source: See the full article “Credit-Card Mail May be Boring, But Ignoring It Could Cost You” by Karen Blumenthal, Wall Street Journal 12/16/09


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