Reining in the credit card companies

What’s in your wallet?  A ticking time bomb called a credit card.

The Democrats in Congress are starting to think about doing something about it[*1] (Kansas City Star, free registration required).

Here are some traps the “Stop Unfair Practices in Credit Cards Act” would address:

•Retroactive interest charges: It would ban the practice of charging higher interest rates on an entire existing balance, including past purchases made at a lower interest rate.

•Unjustified interest rate increases: It would limit penalty interest-rate increases to 7 percent above the prior rate if a consumer fails to make a payment on time.

•Repeat over-limit fees: It would allow card companies to charge over-the-limit fees only once, unless a consumer racks up even more purchases above the account limit.

•Fees for paying a bill: It would prohibit the practice of charging administrative fees to consumers who at the last minute pay their bills over the phone to avoid a late payment.

•Double-cycle billing: It would ban interest rate charges on balances that have already been paid on time.

I’m more inclined towards the Dave Ramsey[*2] “cut the darn things up and walk away from credit cards” approach, but something needs to happen to get under control predatory lenders, from payday loans to credit card companies.