Beginning October of this year, Discover and American Express cardholders can breathe a sigh of relief as their credit card over-the-limit fees are laid to rest. Amex and Discover took the plunge to eliminate the fee in response to the Credit CARD Act of 2009, which mandates that card companies cannot charge over-the-limit fees unless consumers give their consent.

After doing the math, both card issuers independently arrived at the same conclusion: establishing a system through which cardholders could decide whether or not to have over-the-limit privileges (and pay the accompanying fees) would cost lenders more than they would rake in through fees.

As for the other big credit card issuers, such as Chase, Bank of America, Citi, and Capital One, it remains to be seen how they handle the new provision, which steps into effect in February of 2010. One thing is for sure though: without the income from overdraft fees, credit card companies will come up with other ways to increase their revenue.

In notifications sent out to its cardholders, American Express gave some indication of how it intends to compensate for the loss: increasing credit card interest rates and raising other fees. This is hardly welcome news for cardholders who have always stayed well within their credit limit. Nonetheless, the countless Americans charged a hefty $39 for overdrafts as low as $1.96 can breathe a collective sigh of relief.

Over the years, card companies and banks have raked in phenomenal sums through over-the-limit and overdraft fees. What began many decades ago as a not-so-friendly “reminder” to stay within one’s credit limit turned into a cash cow for card issuers. In 2008, credit card companies alone collected approximately $19 billion in penalties and fees. This year, banks are projected to make out with a whopping $38.5 billion for customer overdrafts.

Not surprisingly, those hardest hit with the fees are those most strapped for cash. Cardholders who most frequently tip over their lines are the ones who can only afford to keep a single card.

Most pundits saw it coming: a wave of frenzy as credit issuers scramble to get their ducks lined up before the new provisions called for in the CARD Act of 2009 kick in.

Once the provisions of the new law steps into effect in August of 2010, card issuers will no longer be able to raise interest rates retroactively on existing credit card balances. In response, card issuers are doing one of two things, according to The U.S. News and World Report: Many card issuers are simply raising interest rates before the new law steps into effect. In addition, card issuers are switching many of their fixed-rate credit cards over to variable cards. This will allow them to take advantage of a loophole in the law, which continues to allow interest rate changes on cards with variable interest rates.

Although many experts feel it was the new bill that lit the fire beneath the card companies, card issuers blame the current economy and argue that the increase in rates is necessary to compensate for an increasingly risky lending environment.

Whatever the true motives may be, expect card issuers to continue to tighten terms and the credit card landscape to be increasingly perilous to navigate. More than ever, it’s important for cardholders to be proactive and take measures to protect themselves. Here are three ways to protect yourself against unfavorable changes to terms:

1. Keep your credit solid: A high credit score is an asset in any economic climate, but these days, it is a must. If you can maintain a high credit score and keep your credit reports impeccable, you should be able to remain, for the most part, immune to the cyclone of changes

2. Be selective about where and how you use your card: Card companies watch for certain purchase behaviors. When you use your card for a cash advance, it triggers a red flag. Also, avoid purchases with what creditors call “questionable merchants:” places such as pawn shops, tire retreaders, and marriage counselors; even charging all your grocery purchases to your card may not be such a good idea.

3. Vote with your feet: There are hundreds of banks and financial companies issuing credit cards, and if you don’t like the terms your card issuer are offering, you can always apply for a new credit card. In addition to applying for a credit card online, also condider looking into credit cards issued by small credit unions, which often offer cards with more cardholder-friendly terms and greater service.

Credit card and identity theft strikes in all sorts of places, ranging from the mundane to the bizarre. One of the more peculiar instances of stolen credit cards involved a Nashville, Tennessee man who hired homeless to dig thru the garbage dumpsters of hotels near the Nashville airport to find disposed receipts with credit card numbers.

The man used the stolen credit card information to purchase anything from food to automotive parts and sell them to friends at half the price. A Pennsylvania woman, who stayed at a motel in Nashville last month, reportedly ended up with $12,000 in fraudulent charges on her credit card.

That’s chomp change compared to what Apple boss Steve Jobs is facing following a scam involving a gang of U.K. DJs, who used stolen credit cards to purchase their own music on iTunes. The scam involved nine people, who uploaded a total of 19 songs on iTunes, according to the U.K. Daily Mail. Using 1,500 stolen credit cards, the fraudsters then downloaded tracks to the tune of £460,000 ($735,000), netting them about £200,000 ($320,000) in bogus royalties from iTunes and Amazon.com. The number of downloads even boosted the position of the songs in the music charts! The scam was eventually unraveled through a joint investigation between British e-crime police and the FBI.

As colorful as these stories are, they hide the fact that credit card theft and identity theft most often strikes in more mundane places, and often where you least expect it. Almost half of all instances of identity theft originate with relatives, friends and neighbors. This type of fraud costs more time and money; and costs to victims are often higher.

Credit card and identity theft involving family members take many forms. An ex-spouse may, for example, use the social security number of one of his children (living with the mother) to open credit cards and make charges without paying them off. A room mate, cleaning lady, or friend could go through your papers and finds your social security number and use it to apply for new credit cards. A family member might find an unused credit card in a drawer and, unbeknownst to the cardholder, proceed to rake up high credit card charges on the account.

When family members or friends are involved, victims often hesitate to report it, hoping that the family member will make good on the charges and pay them off. The issues confronting victims of credit card theft in such instances are very complex: No one wants to report friends or family members to the police, nor to prosecute them to get them to pay off the debt.

Unfortunately, in such cases, most of the time victims adopt a wait-and-see attitude, hoping that the perpetrator will make good on the debt. In far too many cases, however, this doesn’t happen, and the victim ends up being on the hook for the debt, in many cases creating long-term economic hardship.

If you or someone you know is a victim of credit card or identity theft involving a family member or friends, what should you do? Your best bet, if you want to avoid being on the hook for the debt yourself is to file a police report, just like you would in a regular case of ID theft. Filing a police report is only a first step, and it’s not the same as pressing charges against the perpetrator, but it is an important step to take to clear your name.

The other alternative is to approach the credit card issuer or other companies involved, explain to them what happened, and see if they are will to work with you to reach a resolution without police involvement. Most companies, however, will be less likely to cooperate, if there is not a police report involved.

The benefits of filing a police report are many. It will give you protection under federal and state laws as a victim of identity theft, and this means that you will not be on the hook for the debt. In contrast, if you are aware of the fraud for a while and do nothing to stop it, it will appear suspect. If you eventually then do try to clear the fraud activity, you could run the risk of being considered an accomplice or co-conspirator.

For more information, see this article about How to Protect Yourself from Credit Card Fraud. If need to report identity theft, see the following article:

How to Report Identity Theft

Every year, identity theft strikes almost 9 million Americans. The theft is most typically discovered within the first three months, but in some cases it takes much longer; the victim might only find out when he or she is declined for a new credit card application.

The most common form of identity theft is using someone’s personal information to open a checking account, a credit card account, or a mobile phone account. In 43% of cases, the fraud is perpetrated by someone that the victim knows. On average, the cost to the victim is upwards of $6,000.

Apart from the financial damage, identity theft can damage the reputation of the person affected and create long-term financial difficulties, particularly if not addressed in the right way. If you or someone you know are a victim of identity theft, here are five important steps to minimize the damage:

1. Early reporting is essential. The earlier you discover and report the crime, the better. For this reason, monitor your credit report regularly; at least once a year, but preferably more frequently. You are entitled to a free credit report from each of the credit rating agencies once a year at www.AnnualCreditReport.com.

2. Put a fraud alert on your credit report. If you fall victim to identity theft, immediately contact the three major credit reporting agencies and ask them to put a fraud alert on your credit report. Fraud alerts are typically valid for 90 days, but if you have suffered identity theft, request an extended fraud alert, which lasts seven years.

The three credit reporting agencies have great online resources to facilitate the process of putting a fraud alert on your credit report. Use the links below to find the material and information needed to place the alert with each agency:

January is a month dreaded by all. T’is the season after the Season, a time of reckoning, when we’re left with long dark days, woefully expanded waistlines, and a mounting pile of credit card bills.

Every Holiday shopping season, we Americans go through the same ritual, wowing not to overspend, and then proceeding to swipe away like there is no tomorrow. However, according to a new survey by the National Foundation for Credit Counseling (NFCC), this year may be different. With the biggest spending season of the year just around the corner, more consumers are planning to leave their credit cards at home and pay by cash.

In the survey, which polled more than 3,800 consumers at the end of October, more than two thirds (68 percent) planned to pay in cash for their Holiday purchases, and ten percent planned to utilize lay-away programs. Only 22 percent said they were going to charge their purchases to their credit cards, and out of this group, 12 percent said they would pay off the bill in full when it arrived.

It remains to be seen whether Americans will keep up on that resolve or if it will go the way of the decision not to binge on all that wonderful, luscious Holiday food. Still, there are many reasons why this year may be different.

“Consumers are faced with spending decisions unlike ever before,” says Gail Cunningham, spokesperson for the National Foundation for Credit Counseling (NFCC). “Many have had their access to credit limited by issuers closing accounts or restricting credit lines. Others have self-imposed spending restrictions, instead choosing to pay down existing debt.”

According to previous surveys by the NFCC, consumers have indeed begun to cut back and make lifestyle changes in order to stay afloat. In a July survey, almost three quarters of respondents said that the one thing that would make them feel more financially secure would be to have less debt.

Still, Cunningham notes, the holiday season may well tempt consumers to revert to old spending habits. The holiday season has traditionally been a time when many consumers rack up additional credit card debt, in some cases even as they are still paying off the holiday spending from the previous year.

So will our intentions to wean ourselves off our addiction to plastic translate into reality once we hit the stores? According to the NFCC, one third of Americans has no savings, and let’s face it, without money in the bank, shopping for Holiday gifts and parties presents a challenge—unless, of course, you’re planning to hand out coal this year. Still, as Cunningham points out, in the face of a continuing difficult economy, higher credit card interest rates, and tighter terms, foregoing of those Holiday shopping indulgences may be more important than ever.

“Spending during the next two months can make or break many Americans financially, with the ramifications of poor decisions following them for months or years,” Cunningham notes. “This is likely to be a holiday shopping season unlike any in recent history, with none of us knowing the outcome until the data arrives in January. It is our hope that consumers shop wisely, remembering that digging a financial hole is not a gift to anyone.”

One of the most common credit card mistakes that cardholders make is to get seduced by the beguiling option of paying only the minimum monthly payment on their credit card. It’s easy, it’s simple, and it endlessly postpones the pain of facing up to what we actually spent last month—and the month before, and the months before that.

So what if the card balance is well over $2,000? All you have to do to stay even is to pay a measly $50 or so a month; something that even those on a tight budget can generally manage. However, unbeknownst to most cardholders, our addiction to paying the minimum is a costly one; people who consistently pay only the minimum monthly due on their credit cards end up paying the initial charges two to three times over, depending on the card interest rate.

Worse, most people do this without realizing it. Unless you actually sit down to calculate the true cost of paying the minimum, it’s impossible to know just how much it would cost to pay off the card balance in full by paying only the minimum each month.

The new CARD Act of 2009 is about to change all of that. Effective February of 2010, the new provisions will require card companies to clearly print at the top of each monthly statement exactly how long it will take to pay off the balance making only minimum payments and how much it will cost.

Most cardholders have some awareness of how their monthly interest charges add up over time, but few grasp the big picture in full detail. For example, an $8,000 debt on a card with 22.99% APR, when paid off at a rate of $400 a month, will milk an additional $2,186 from your pockets over the course of the two years and two months it will take to pay off.

Lower your monthly payment to $200/month, and you can expect interest payments alone to total $7,331.44 by the time you mail in your last payment, nearly six and a half years later.

Take a look at what paying the minimum will cost you. The minimum payment is calculated as a percentage of the balance on the card, most typically around 2.5%, so the payment amount decreases as the card balance goes down. Payments on a balance of $8,000, for example, will typically start out at about $200 a month, but because of the decreasing monthly payments, if you pay only the minimum, you will be paying off that $8,000 balance for the next 49 years. That’s a lot of time for interest to accumulate, and indeed, in the example of a 22.99% APR the grand total interest paid would be a colossal $25,340. Add that amount to you original debt, and voila: you’ve paid back the initial charge four times over.

By making figures such as these available to cardholders up front, the CARD Act of 2009 hopes that consumers will have the knowledge necessary to make smarter credit choices.

In addition, the Act also mandates that issuers disclose APR rates, fees, and their effective dates in an easy-to-understand table format; that they clearly disclose the sum totals of interest and fees; and clearly state the repercussions of late payments, including exact APR penalty rates and late fees.

If you have bad credit or no credit history, one of the fastest ways to improve your credit or establish a credit history is to apply for a credit card. Because it is difficult for people with poor credit to get approved for a credit card, however, this easily becomes a Catch-22: you can’t get approved for a credit card to improve your credit score until your credit score improves.

One solution to the problem is to take out a so-called subprime credit card, which targets people with bad credit or people who are just starting to build a credit history. Subprime credit cards have long been a controversial segment of the credit card market, however, under fire mainly because they start new cardholders out with very low credit lines and charge them a hefty sum of money for the privilege.

This type of credit card for people with bad credit has earned the nickname fee-harvester credit cards, because of the many high fees they levy on cardholders. Further, the fees are often couched in confusing terms, so it can be hard to see beforehand what the real cost of the credit card is.

One subprime card, for example, the First Premier Bank, features a minimum $250 credit limit. However, new cardholders have to pay a $29 account set-up fee, a $95 program fee, a $48 annual fee, and a $7 monthly servicing fee (which effectively is another $84 annual fee). That adds up to $179 in fees just to get the card, leaving only $71 in actual credit for a new card with a $250 credit limit. If you add the total $84 cost per year of the monthly servicing fee, you actually end up paying $263 the first year and $132 in annual fees each year after that for the privilege of having a card with a $250 credit line.

In addition to the onerous start-up costs, fee-harvester credit cards come with many additional charges. For example, while cardholders can view their monthly statement for free online, many credit cards for people with bad credit charge a fee for cardholders who want the monthly statement mailed to them. In addition, while cardholders are eligible to get their credit limit increased on a regular basis, they typically have to pay a fee of e.g. $25 to get their account reviewed and approved for a credit limit increase.

According to consumer advocates, subprime card issuers are extremely aggressive with their debt collection tactics. They also push on cardholders confusing bait-and-switch offers on both credit limits and card terms, and offer deceptive add-ons such as “credit protection,” which unsophisticated, novice cardholders often feel pressed to sign up for.

Spokespeople for the consumer credit industry counter that subprime credit cards are a useful tool for consumers with bad credit to improve their credit score, and that they are only priced according to the increased risk card issuers are taking on.

So, are bad credit credit cards worth the cost? They may be in the future. The new Credit CARD Act of 2009 puts curbs on some of the worst abuses of fee-harvester credit cards. After February 2010, when the new rule steps into effect, the account opening fees charged by subprime credit card issuers cannot exceed 25% of the available credit limit during the first year. In other words, for a card with a $250 credit limit, the initial fees charged cannot exceed $67.50. In the above example, that would be about $200 less in costs for the first year. The restrictions do not include other fees, like late fees and over-the-limit fees.

The new law is a step forward for people with poor credit looking to apply for a credit card. However, it is too early to tell how effective it will be. The law puts no restrictions on fees after the first year, so the door is wide open for subprime credit card issuers to find ways to make up the lost fee income by tacking on additional fees or raising existing fees.

Credit card reform has taken much flak for giving card issuers plenty of time to take measures to protect themselves against some of the more important provisions of the new law. Card issuers have aggressively hiked interest rates in advance of the February 22 deadline for new rules that limit interest rate increases on existing balances. As a result, many consumers may feel that even when the new provision becomes effective, it will be too little, too late.

However, there are still reasons to celebrate. Starting 2010, cardholders can say good riddance to some of the more sneaky and onerous of credit card terms, including double cycle billing and card issuers’ ability to apply payments to the balance with the lowest interest rate first.

Over the long term, however, the most important features of the new law may well turn out to some of the less conspicuous ones, i.e. the new provisions, which mandate greater disclosures, more consumer education, and easier access to debt counseling resources.

Why? With credit cards, the general rule is this: the less you know, the more it will hurt you. There is nothing wrong with credit cards per see, it depends on how they are put to use. Unfortunately, credit card companies have made an art of making credit card terms deceptively obscure. As a result, unawares consumers end up paying through the nose for the convenience of paying with plastic.

Ultimately, greater consumer awareness will provide the best protection of all. Bearing this in mind, here is CreditCardGuide.com’s vote for the three most important rules of the new credit card reform:

1. Minimum payment disclosures. Effective February 22, 2010, credit card statements must educate cardholders about the consequences of the financial decisions they make about their credit card debt. Firstly, statements must show how long it would take to pay off the balance on the credit card, if the cardholder opts to make only minimum payments, and how much the cardholder would end up paying in interest charges.

To give cardholders a basis of comparison, that statement must also disclose how much cardholders would have to pay each month if they wish to pay off the balance in 36 months, and how much interest that would accrue. Card issuers must also clearly disclose information like year-to-date totals on interest charges and fees, as well as the reasons for those fees.

The new rules about disclosures could turn out to be perhaps the most important provision of the new law. The minimum payment is one of the most deceptive things about credit card usage and a main reason people end up with credit card debt. The low monthly payments encourage a charge-now, pay-later mentality. Up till now, many consumers had no idea just how expensive the practice of paying just the minimum monthly credit card payment is.

2. Higher minimum age, and required financial literacy education for students. Young adults in the past have been one of the most vulnerable groups of new credit card users, often lured in by aggressive marketing tactics and freebies offered in exchange for filling out a credit card application. The new law raises the minimum age for applying for a credit card (without a co-signer) to 21 years, and restricts credit card companies’ ability to market cards on campuses.

Perhaps most importantly, colleges and universities that allow card issuers to market on campus are required to provide financial literacy education for their students. Depending on how it is implemented at colleges and universities across the country, mandatory financial literacy education could turn out to offer the most effective protections for students.

3. Greater Information about Debt Management Counseling. The new law requires credit card companies to take some degree of responsibility to help consumers with high credit card debt and other financial woes. Under the law, card issuers are required to set up toll-free telephone numbers through which consumers can get information about resources for nonprofit credit counseling and debt management assistance. The Federal Reserve has been given the mandate to issue more specific guidelines to card issuers about this provision by November 22, 2009.

Like an emergency medical assistance team rushing a dying patient to the hospital before the last vital signs fade away, members of Congress are pushing to move up the deadline for the enactment of the key provisions of the new credit card law to December 1.

Will one of the key features of credit card reform turn out to be dead on arrival? It’s barely six months since Congress passed the new Credit CARD Act of 2009, and already, one of its key provisions aiming to curb interest rate increases has been rendered almost ineffective. In advance of the February 22, 2010 effective date of the new provision, card issuers have aggressively hiked interest rates across the board, and changed fixed rate credit cards to variable rate cards, which are less affected by the new provision.

Even if Congress succeeds in moving up the deadline, will it really make a difference? According to a report scheduled to be released end of October by Pew Charitable Trusts’ Safe Credit Cards Project, card issuers have already increased interest rates by an average of about 20 percent, and in many cases more than doubled interest rates on credit cards, taking aim even at cardholders who have never made a late payment.

So, has credit card reform lost its teeth, so to speak? Or worse, as some would argue, has government intervention done more harm than good by precipitating a pull-back of credit card terms that might otherwise not have been?

Well, not so fast. On the face of it, yes, card issuers are hiking interest rates and tightening credit terms in advance of the enactment of the new credit card provisions. However, let’s not forget that the credit pull-back began long before Congress passed the Credit CARD Act in May of this year.

Tightening credit card terms was triggered not by the anticipation of the new laws, but by the increasingly risky lending environment that followed in the wake of the near-economic collapse in the fall of 2008. The credit crisis, which began in the subprime mortgage market, but quickly spread to other types of credit, is the main reason card issuers had to take steps to restructure the risk profile of their credit card portfolios.

Credit card companies over the past decade have harvested huge profits by willy-nilly handing out unsecured credit lines with high interest to marginal consumers. However, issuing credit cards with starting credit limits of $10,000 or more, no questions asked, to consumers earning $40,000 or less is a risky proposition even in the best of times. When the economic recession hit, and the ranks of the unemployed began to swell, credit card defaults sky-rocketed. Card issuers had to take steps to curb losses by increasing revenues. And the easiest way to increase revenues in credit card world, of course, is to jack up interest rates.

Did the February 22, 2010 deadline set by Congress, which puts an end to card issuers’ ability to increase interest rates on existing balances, speed up the process of rate hikes? Undoubtedly. Would it have happened anyway? Most likely. With average credit card defaults topping 10 percent, card issuers must and will do anything they can to stem the tidal waves of losses.

Would the interest rate increases have happened as fast and as aggressively? Probably not. Chances are that rate increased would have been introduced much more cautiously, gradually and inconspicuously.

And so, even as the patient is being rushed to the emergency room, perhaps we should call the glass not half empty, but half full. The dramatic pace with which card issuers have hiked interest rates has awakened consumers, many of whom had grown dependent on easy credit, to the fact that credit cards are not their friend after all. As many have learned the hard way, credit cards can be toxic financial assets if not handled with the utmost care. Twice-wary consumers, newly awakened to the pitfalls of plastic, might well on their own accord begin to use credit cards with much greater caution. And, credit card reform or not, that wouldn’t be such a bad thing after all.

As a nation, we pride ourselves in having overcome many of the racial barriers that marred America in the past. However, according to a recent study by economist Ethan Cohen-Cole at the Federal Reserve Bank of Boston, when it comes to getting approved for a credit card, race may still matter.

Based on an analysis of the credit files of 285,780 individuals, the study found evidence that credit card companies may base their decision about who to approve for credit cards in part on the racial composition of the neighborhood in which the applicant lives. In other words, two individuals of the same age, earning a similar salary, with similar credit histories and credit scores may receive a different reply when they apply for a credit card. An individual living in a predominantly Black neighborhood is less likely to get approved for a credit card than the individual in a White neighborhood, even when the neighborhoods have identical community characteristics. In addition, for individuals who do get approved for credit cards, the amount of credit they get approved for is also likely to vary. Someone living in a White neighborhood is likely to get started out with a higher line of credit.

In today’s society, credit cards are an important first step up the financial ladder. For most consumers, they are the first form of credit obtained, and the first step on the path to building a credit history and a good credit score.

As a result, any disparities in access to credit cards might get magnified down the road by making it more difficult later in life for the same consumers to get access to other forms of credit, most notably a mortgage, because their credit history is too incomplete. For this reason, the differential access to credit cards could reinforce current disparities in home ownership.

Many studies over the past decades have highlighted the fact that despite federal legislation prohibiting discrimination among home-buyers, minorities still face significant barriers to buying homes. One of the key factors that contributes to the difficulties faced by minorities is having an insufficient credit history, which lenders more cautious about approving loan applications. Even when people with incomplete credit histories do get approved for a loan, they face more stringent terms, including higher interest rates and monthly payments.

If, indeed, the results of the Boston Federal Reserve Bank study are correct and it’s harder for minorities to get approved for credit cards, these disparities are likely to persist. Without regular use of credit cards to show a reliable payment history, it is much more difficult to build up the good credit history necessary to buy a house. Credit histories, of course, are also used in approving people for car loans, for car insurance rates and in job applications.

The disparity in access to credit cards has another drawback. Many card users feel that credit card interest rates to the tune of 25% APR or higher amount to little less than usury. However, these rates are nothing compared to the 300+% charged by the payday loan market, where consumers without credit cards often are forced to go when needing extra cash.

Of course, a single study is just that, and not conclusive evidence. Still, the study speaks to the need for greater transparency in the credit card industry and more regulatory study of the factors that impact the credit decision process.