Credit Cards: What Should Be In Your Wallet? (NPR)

By Wendy Kaufman

Morning Edition, May 28, 2009 · While Congress was working on sweeping credit card reform legislation in recent months, some lenders were not waiting around for the outcome — they were hiking interest rates while they still could.

"We have seen them raise rates on consumers in good standing … sometimes even doubling the interest rates," says Pamela Banks of Consumers Union.

The new credit card legislation that President Obama signed last week limits or even bans certain fees and interest rate hikes. It requires timely posting of payments and will give consumers more information about their accounts in plain English.

Banks says she has also seen new fees being imposed — something that is generally legal, at least until those measures go into effect.

Still, Banks says that if you don't like what the credit card company is doing, you should tell them.

"And often times if you question it, they will not charge you the fee or they will not increase your interest rate, but you have to be persistent," she says.

But while some companies have jacked up the cost of their credit cards, others are already making changes that will benefit consumers. Greg McBride, senior financial analyst for Bankrate.com, says this is a good time to figure out which credit card works best for you.

McBride suggests asking yourself: "Are you someone who always pays the bill in full or are you someone who carries a balance, whether it's routinely or just occasionally, because this is a real fork in the road in terms of how you shop for a credit card."

McBride says if you pay your bill in full every month, like 40 percent of Americans, then a rewards card that offers cash back, airplane mileage or other incentives is for you.

However, says McBride, "if you carry a balance — even occasionally — then your motivation should be getting the lowest interest rate you can and keeping your total costs of credit low."

For example, he says, if you carry a high balance, your best bet may be a card that has the lowest interest rate, even if it has an annual fee. Web sites such as Bankrate.com and BillShrink may be helpful in finding the best options for you.

And there's another point to consider: Since the new rules will make it harder to raise interest rates on existing cards, banks and credit unions may try to woo consumers who have a strong payment history.

Before signing up for that special introductory offer, cautions Peter Pham of BillShrink, read the fine print or contact the card issuer directly. Ask the company to define what's considered a late payment, what the current interest rate is and what happens if you have a late payment or go over your credit limit, he says. Find out if you will be charged a fee for that, and, if so, how much.

These are just a few of the many questions consumers should ask now, and again next year — after the new rules are in effect.