The Credit Card Accountability, Responsibility and Disclosure Act of 2009, which President Obama signed on May 22, bans many of the nasty credit-card practices that have irked borrowers for years. Most of the new rules take effect in February 2010. Here’s what’s in it for you:

• No rate hikes on existing balances. Credit-card companies won’t be allowed to raise rates on existing balances unless your minimum payment is at least 60 days overdue. Your previous rate will be restored if you pay on time for the next six months.
• Better notice of rate increases. Card companies can still increase fees and raise rates on new purchases, but they’ll need to disclose the changes at least 45 days before they take effect (rather than today’s 15-day notice).
• One-year rate fix. Your interest rate won’t rise for one year after you open a new account, unless the rate increase was disclosed from the beginning. Card companies can still offer low promotional rates, but they must last at least six months and the rules must be clearly disclosed.
• Highest rate counts first. Card companies must apply any payment above the minimum to your highest-rate balance first. This will be particularly helpful for people who take advantage of low-rate balance-transfer offers. Card companies often entice customers with low rates on balance transfers but charge higher rates on new purchases (say, for example, 0% on balance transfers and 11.99% on new purchases). Unless you paid the balance in full, your payments would be applied first to the low-rate transfer and then to the higher-rate portion of the bill – paying off the 0% rate while accruing interest on the balance at 11.99%, for example. Now they’ll be required to reverse that practice and give you more time to benefit from the lower rate.
• Bans universal default. This had been a particularly hated credit-card practice: in the past, you may have had a stellar record with your credit-card company and always paid your bills for that card on time, but the card company could still jack up your rate if you missed another lender’s deadline. The new law prohibits credit-card companies from raising your rate if you make that card’s payments on time.
• Prohibits double-cycle billing. Another despised practice, double-cycle billing enabled card companies to charge interest on balances that you actually paid on time the previous month. They won’t be able to do that anymore, either.
• No surprise overlimit fees. Card companies won’t be able to charge fees for exceeding your credit limit, unless you agree in advance to pay a fee in return for being allowed to exceed that limit. Otherwise, charges that are over your credit limit will be denied, and no fee will be charged.
• Tougher for under 21 to get cards. You’ll only be able to get a card under age 21 if a parent, guardian or spouse co-signs the application, or if you can provide proof that you have enough income to repay any credit extended.
• Longer mailing time. Credit-card companies must mail bills to customers at least 21 days before the due date, rather than 14.
• Better disclosure. People are always shocked when they see how long it would take to pay off their balance – and how much they’d pay in total interest – if they only made the minimum payment every month. Credit-card companies will finally need to reveal those totals. Card companies will also need to disclose the payment dates and late payment penalties clearly.
• Fewer gift-card cutbacks. In the past, many gift cards shrank in value if you didn’t use them quickly. After August 2010, gift cards cannot expire for at least five years, and can’t charge inactivity fees until more than a year has passed.

The downside. Banks have been earning big money from many of these practices and will be looking for other ways to boost their profits. Expect to see more cards start charging annual fees, especially for rewards cards, and keep an eye out for other new fees. Card companies can still jack up interest rates on new purchases, as long as they give you the required notice, so you still need to monitor your bill carefully. If you find a rate or a fee you don’t like, it’s worth a try to call your card company and ask for a break to keep your business. And you won’t need to worry about the interest rate at all if you pay your balance in full every month.