For the most part, the new rules will just stop problems before they start – like cracking down on so-called “universal default,” which previously allowed lenders to raise your interest rates if you were late on an unrelated payment. So if you pay your gas bill late, you don’t have to worry about your Visa interest rate going up (though late payments will still affect your credit score which may change the rates you’re eligible for on your next credit card).

Some of the most visible changes will affect teens and college students. If you’re under 21, you’ll need one of your parents to co-sign your application for a new credit card, for instance. And you’re unlikely to see credit card sales reps offering free t-shirts in the student center – the new rules prohibit banks from soliciting new business within 1000 feet of a college campus.

If you carry a significant balance on your credit card, the new rules could be a big help. Before your bank can raise your interest rate, they’ll need to give you 45 days written notice. And if the increase is big, you now have the option of closing your card and paying off the balance at the current rate.

And for those of you who only make minimum payments, you’re going to reminded monthly of the cost of that mistake. Starting this month, expect to see a “Minimum Payment Explanation” laying out exactly how long it will take to pay off your balance. For example, a mere $2000 on a card with an 18% APR will take 15 years to pay off if you only chip in the minimum each month. We’ve told you this before, but now you’ve got no excuse! From our perspective, this kind of transparency is what gives the consumer power.

Last but not least, watch out for annual fees on cards that used to be free. All these restrictions mean less revenue for lenders, so you can expect them to try and make up for it with annual fees. Unless you are getting some really amazing benefits, it’s probably not worth paying a fee for a credit card. Remember, it always pays to shop around for credit cards, bank accounts, and everything else.

MasterCard and Visa each charge a 1 percent “processing fee” for international purchases, and American Express adds 2 percent. On top of that, the issuing bank is permitted to determine its own additional surcharge.

The sneaky fees have been going on for a few years now with most consumers unaware that they’re been gouged. In 2006, the New York Times first reported on the fees and experts advise consumers to know their credit cards’ policies on foreign purchases:

“Consumers will save a lot of money if they think about using the right card when traveling, and think about it in advance,” said Jennifer Openshaw, chief executive of Openshaw’s Family Financial Network and host of “Winning Advice with Jennifer Openshaw” on ABC Radio. “Using the wrong card can add close to 10 percent to the overall cost of a given purchase,” she said. “For example, your bank might charge you 3 percent for a purchase, and the merchant might charge 6 percent to convert the charge to dollars.”

ATMs are a handy way of getting cash out in the local currency (and saves you the hassle of travelers checks). While many banks will ding you there too with an “international cash withdrawal fee” averaging $5 per withdrawal, you’ll typically get the most favorable exchange rates.

Curious how your credit cards stack up? Bankrate.com compiled this chart that compares surcharge rates at 21 credit-card issuers.

I was recently reviewing the Survey of Consumer Finances, published earlier this year using data from 2007. I thought it was interesting that only 46.2 percent of American households reported having credit-card debt, since the common perception is that almost everyone is living well beyond their means. But what the survey results really reveal is that more than half of the country either doesn’t carry a credit card or pays off their balances every month.

Want to join that club? Here’s what you have to do:

1. “Snowball” your debt. Transfer balances from high-interest cards to a low-interest card and then focus your efforts on paying it off. This will save you the headache of tracking multiple balances at once.
2. Double your minimum payment. If your card has an 18 percent interest rate and you pay the minimum $100 per month, it will take more than 10 years to pay off a balance of $3,000, racking up more than $2,000 in interest in the meantime. Double your payment and you’ll be debt-free in half the time while paying only $754 in interest, according to this calculator.
3. Repay debt with money from savings. Don’t touch your retirement accounts — the stiff penalties make it not worth it — but it’s a good idea to cash out your short-term savings to reduce your debt burden. You may want to keep some cash liquid for emergencies, but it’s highly unlikely you’re earning more in interest than you’re paying to the credit-card bank every month. Using savings to pay down debt is like getting an instant return on your money of 12 or 18 percent (or whatever your APR is).
4. Don’t take out a secured loan. The difference between a secured loan and an unsecured loan is whether you have to put up collateral to sign for it. Credit cards are unsecured debt, so taking out a secured loan — like against your home equity or car — is just about the riskiest thing you can do. If you fail to pay your credit cards, your credit score will tank, but if you fail to pay a secured debt, you’ll lose your house or mode of transportation. Don’t chance it.
5. Stop using your credit cards. It may seem obvious but many people fall into the trap of continuing to use their plastic while trying to pay down their balances. Think of it as financially treading water: It’s impossible to get ahead this way.

At the risk of sounding smug, sometimes I feel like I’ve mastered the credit card game.

I get 1 percent cash back on my rewards card. And because I pay it off in full every month and it has no annual fee, my credit card bank is essentially paying me a dividend on top of giving me an interest-free loan every month. I consider it a bonus for being responsible with credit.

However, Citigroup is changing the rules. AmericanBanker.com reports:

Citi has been informing some of its cardholders that they will be charged an annual fee of $30 to $90 unless they spend a certain amount per year, usually $2,400.

Annual fees, once common, largely disappeared in the 1990s, and last year accounted for only 4%, or $3 billion, of issuers’ total fee income, according to the card advisory firm R.K. Hammer.

But Robert Hammer, the Thousand Oaks, Calif., firm’s chief executive, said Thursday that he expects that number to “rise substantially” in the next six months, and predicted that by 2010 issuers will earn at least $9 billion from annual fees.

“It’s a necessary cost of doing business” in light of the law’s restrictions on interest rates and other pricing, he said. “The old business model’s been pretty much decimated.”

It’s a frustrating setback for consumers. Cards with annual fees typically offer much better rewards than my measly 1 percent cash back.

Take the American Express Centurion, a.k.a. the “Black Card.” It carries a whopping $2,500 annual fee in addition to a $5,000 initiation fee — but in return, customers receive free airline tickets for traveling companions, personal shoppers at stores like Gucci and Neiman Marcus, and 24/7 international concierge services.

At least for Black Card holders, they are choosing to pay that premium for executive-level perks. But I doubt Average Joe wants to swallow $90 a year for the privilege of using plastic.

It seems that Capital One’s customers have become better at paying their bills on time and not going over their limits. As CEO Richard Fairbank put it on a conference call, “we continue to see customers behaving defensively in the economic environment.”(One assumes that “defensively” is banker-speak for “responsibly.”)

As the reality of the harsh economic climate continues to hit consumers, we have apparently begun to wisen up and take better care of our finances. Paying more attention to credit card limits and payments is a good first step. Personally, I have also (mostly) eliminated my morning Starbucks run and am snowflaking the savings to more quickly pay down student loan debt.

Of course, credit card companies have already raised rates (sometimes substantially) on old customers and tightened their terms for new customers. Considering that service fees accounted for $19.1 billion of industry revenue in 2008, one wonders what future cost-cutting and fee-raising measures are in store for cardholders.

The analysis comes from Keefe, Bruyette, and Woods (KBW), an investment firm in New York City. A majority of credit card company stocks have risen about 150 percent in the second quarter, KBW analysts noted.

Considering the ailing economy and the financial struggles that many families across the country are facing, there is no better time than now to become financially educated and know what is going on with your own money.

As these companies continue to profit, often at the expense of unwary consumers, some credit card users may be looking to the government for some clarity on credit card rules and regulations. But ultimately, the responsibility lies with each individual consumer.

Bankrate.com took a look at credit card fees and terms and compiled a company-by-company comparison that may be useful when choosing a card for yourself.

As we’ve mentioned before, some parts of the bill — like requiring larger print on credit agreements — give consumers a fair shake. But it also means banks may start charging interest on accounts that are paid on time and in full every month. That means punishment for people with sterling credit scores who have never carried a balance or paid a bill late in their lives.

From The New York Times:

Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.

“It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”

The Library for Economics and Liberty points out that the regulations would also tighten the credit market for high-risk borrowers.

For years, people who pay their accounts responsibly have enjoyed perks like cash back and frequent flyer miles. But with more annual fees and no grace period, it’s a fair expectation that fewer people with good credit are going to be willing to pay such a high cost for the convenience of using plastic.

A version of the bill passed the House of Representatives last week, but the Senate revision may end up being a little different. The key provisions are expected to pass without much change, so barring any surprises you can expect to see most if not all of the following changes once the legislation takes effect:

• Less tiny print: For starters, you can say goodbye to tiny and unreadable fine print: all disclosures must be in 12-point font or larger. This is such a no-brainer it’s hard to imagine anyone but magnifying glasses manufacturers opposing it.

• No sudden/arbitrary rate increases: When you sign up for a credit card, or any other loan, you expect to know the interest rate you’ll be charged. Recently, however, a lot of credit card customers have been surprised with arbitrary rate increases, even if they never missed a payment. Under the new law, if you are carrying a balance at 10% fixed APR, you’ll know that interest rate won’t change (unless your monthly payment is late, or it’s a promotional rate that expired). And if it does change, you’ll have at least 45 days’ notice, plenty of time to look around for a better card and interest rate.

• High-interest debt automatically paid first: Speaking of interest rates, paying off your highest-interest loans first is always a good idea. It can be hard to actually do that, however, when you have multiple interest rates on one credit card. If you got a cash advance on your card at a high interest rate, and also did a balance transfer at a lower rate, your credit card company can apply your monthly payments to the lower-rate loan. Under the new credit card reform bill, though, high-interest debt will be automatically paid off first, just as personal finance experts have recommended for years.

The bill includes other rules designed to keep teens out of debt, as well as some more technical regulations of the way interest is calculated on existing balances (US News has a good summary of the rest of the changes). Once the Senate finishes its add-ons and amendments, the bill is expected to be voted into law within the next few days.

Sounds really good, right? Well, sort of. If you read further on, you find out that balance transfers are subject to a 3% fee. So that 0% isn’t really 0%. If I were to transfer a balance of $30,000 from another card, that 3% fee would be $900. Ouch!

It’s actually not a bad deal overall, but the lack of transparency hurts consumers, and ultimately the credit industry. Banks and credit card companies use flashy marketing language to get us to sign on the bottom line, but a lot of their profit depends on us not reading the fine print before we sign up. The jumble of annual fees, transfer fees, “convenience fees” (gee, thanks!), late fees and annual interest makes it hard for consumers to calculate the real cost of the transaction. Especially for shorter timeframes, there’s really no difference between interest and fees… both are money out of your pocket, after all.

Another example where fees vs. interest can be confusing is with payday loans and overdraft protection. Payday loans have two-week terms, but their interest rates are rather unhelpfully disclosed as APR (annual percentage rate). If a two-week loan for $100 costs $15, that’s 15% of the principal (assuming you pay it off on time, of course). Compare that to overdraft protection fees, which average about $35, or 35% of the principal (again assuming a $100 overdraft).  Banks don’t have to disclose any interest rate information on overdraft fees, but against payday loans (which have to disclose their annual rate) they end up looking pretty expensive.

So always remember to ask how much a loan really costs, including all the fees, instead of just finding out the interest rate.

As the AP notes, the credit card industry isn’t having a particularly good year:

Scrutiny of the industry comes at a time when consumers are defaulting at high levels on credit card bills.

Last month, Fitch Ratings said its index of charge-offs on prime credit card portfolios rose in December to its highest level in four years. The rate at which cardholders repaid outstanding balances, meanwhile, slowed to its lowest since mid-2004.

Charge-offs are loans written off as not being repaid.

While this legislation still faces many obstacles before it clears the Senate Banking Committee through the legislative process, it’s probably fair to assume that at least some elements of it will gain momentum—due to both consumer demand and because Sen. Dodd is the committee Chairman. It also serves as a good reminder to always read the fine print to avoid big penalties on your credit card.