Published on: Wednesday, June 23, 2010

By Jeanette Lee

The offers fill your mailbox: pre-approved credit cards, low interest rates, 0 percent interest balance transfer offers, frequent flier miles or rebates, and more.

They sound good, but many consumers apply for new credit cards only to find that the low interest rate doesn’t last or that the card comes with unexpected fees.

To protect yourself: Read the details of the credit card offer before you apply for the card, and make sure you fully understand the terms being offered. Below are some things to consider when reviewing a credit card offer:

Interest rates. With a few exceptions, under the Federal Credit CARD Act of 2009, your credit card company cannot increase your interest rate during the first year of your account. If the company does increase rates, the new rates will only apply to new charges, and any balance remaining will accrue interest based on the rate in effect when you incurred the charges.

Since June 2010, the Federal Reserve has stipulated that credit card companies must limit most of their penalties to $25, unless a consumer has a consistent history of violations.

In addition, credit card companies cannot charge consumers multiple fees for violating the same late payment, and penalty fees cannot exceed the owed dollar amount. For example, if a bill is $10, the penalty fee cannot exceed $10.

Fee Notifications. You must be given a 45-day notice of interest rate increases, changes in certain fees such as annual fees and other significant changes to the account terms. The credit card company must allow you to cancel your credit card because of the fee changes. However, if you cancel the account, while the same interest rates and fees will apply to any outstanding balance, the bank can subject you to certain limitations, such as paying off the balance in a shorter period of time.

Credit card companies cannot charge higher interest rates on previously existing debt if the consumer continues to pay the bill on time.

Credit limit. Unless a consumer authorizes the credit card company to allow transactions beyond the credit limit, all transactions that surpass the limit will be denied. If you elect to allow over-the-limit transactions and spend beyond your credit limit, the company may only impose one over-the-limit fee per billing cycle for those transactions.

Card guaranteed in exchange for a fee. Beware of cards that require you to pay a large fee in advance. This may be a scam. Many people have paid up to $200 for a “major credit card” only to receive nothing.

Once you receive a new credit card, read the accompanying credit card agreement to be sure you understand and accept the terms.

If you receive a card that was not what you wanted – for example, it has a lower credit limit or a higher interest rate than you were led to believe – you should notify the company that you decline the card. You should read the accompanying card agreement or ask the company for any specific directions on how to refuse the card.

For the full article, Marylanders can read the Consumer’s Edge Edition 139 at http://www.oag.state.md.us/Consumer/139.pdf.

In addition, Marylanders can call the Consumer Protection Division at 410-528-8662 or 1-888-743-0023; or visit www.oag.state.md.us/consumer.

Jeanette Lee is the Consumer Education Director at the Office of the Attorney General