Credit card reform or just smoke & mirrors?

Finally, the government has done something for real consumers by smiting the odious practices of credit card companies. Or, has it?

President Obama persuaded Congress to pass legislation that deems it evil when credit card companies suddenly raise the already exorbitant double-digit interest rate on your credit card debt to even more astronomical levels. (Whereas we consumers get a paltry two percent, if we’re lucky, on money we put in the bank.)

As of February 2010, specious spikes in rates without notice as well the practice of charging $15 (or higher) fees to pay by phone are likely to be outlawed. If you pay part of the amount you owe, it would be applied to the highest interest-rate balance, not the lowest.

And if you pay only the minimum amount due, the credit card company would have to tell you how long it will take to pay off the debt (like, a quarter of a century) and how much total interest you will be paying them (like, way, way more than the original debt).

The proposal would mean that credit card companies no longer could charge us interest on the previous months balance even though it was paid in full although paid late.

And that aggravating practice of getting a bill just before its due would have to stop; card companies would have to send out bills at least 21 days before the due date.

Obama is eagerly readying his raft of pens to sign the legislation. Since the vast majority of us use credit cards, hurrah for us, right?

Well, it turns out we were probably too fast to rejoice that at last Congress was thinking of us, not just the fat-cat bankers who got those trillions in bailouts from our tax dollars.

True, it is a good thing that our brains will be forced (by regular-size type, not mini, unreadable squiggles) to realize how much money credit-card debt costs us.

The bad news is that credit card companies are likely to raise interest rates, possibly even for those who pay their total debt in full and on time, so that interest rates start accruing from the date of the purchase. Sadly, credit cards with no annual fees will probably become extinct.

And those neat perks such as a mile of free airplane flight per dollar spent may well bite the dust.

Most of us have too much credit card debt — most alarmingly, young people, just out of high school or college that are in full thrall to the credit card companies. And, partly because of this dastardly recession, more of us are falling behind in our payments 6.5 percent of credit-card debt is delinquent, up 50 percent from a year ago.

If the Senate bill becomes law, credit card companies still could raise interest rates on future charges. It used to be thought that 24 percent was usury; now, it may become standard.

Also, anticipating the new law, some companies are racing to raise rates before next February (a proposal to cap interest rates at 15 percent lost in the Senate). Also, companies certainly will move to reduce the amount of credit they are willing to extend to customers they deem too risky.

Once again, when Washington does something for us, it seems it comes with a caveat. Thus, good borrowers who pay their debt in full every month and on time may not be rewarded with having to pay no interest charges. They may have to pay high annual fees. And they may no longer get a free airplane trip every now and then for using plastic.

Wouldn’t it be ironic if were forced back to a cash society? Wouldn’t it just serve the credit card companies right?

(Scripps Howard columnist Ann McFeatters has covered the White House and national politics since 1986. E-mail amcfeatters(at)