Credit reform’s downside

The new credit card fees and interest rates that could throw you for a loop

ROUNDUP. With the announcement that Congress has passed the Credit Card Reform Act, the landmark legislation could hit President Barack Obama’s desk for approval tomorrow. Pundits assure us that this bill is a great protection for consumers, but hidden consequences are sure to surface. Three experts in finance weighed in on possible side effects to the act.

1 No more grace periods. Thomas J. Fox, Community Outreach Director of Cambridge Credit Counseling, says many companies will likely start charging interest the moment a purchase is made.

2 Reinstitution of annual fees. “In the short run, everyone’s going to pay more for credit,” says Gene Truono, the former head of compliance at Chase Cards. Fox adds there will be an annual fee to keep your account open.

3 Difficulty for low-credit consumers. Truono warns that those with bad credit will suffer most from increased annual fees and the lack of interest rate caps.

4 Increased marketing efforts. “Banks have very sophisticated profitability models related to utilization and encouraging utilization,” says Truono, “so they have marketing programs to sell products and services.” Expect creditors to make up for lost profits.

5 Credit card anarchy for the next nine months. Since creditors have nine months to implement these rules, now is their last opportunity to take advantage of soon-to-be illegal traps like double billing cycles and arbitrary rate increases, says author of “Zero Debt: The Ultimate Guide to Financial Freedom,” Lynnette Khalfani-Cox.

6 You may pay less when using cash or debit. A report from the Wall Street Journal indicates that legislators are looking to lift a ban that many credit card companies impose of businesses, forbidding the vendor from offering discounts for paying by cash or check.