As the economic downturn continues, many financially strapped Latino families feel they have no choice but to rely more and more on credit card debt for daily needs as well as unanticipated expenses.

   But before reaching for that piece of plastic, consumers should look out for and remember some subtle and not-so-subtle changes in credit card terms.

   Many cardholders have received written notices of changes, but typically in language that’s anything but clear. The result is that many cardholders could be saddled with unnecessarily high credit card costs. In most cases, once a cardholder receives one of these indecipherable notices, failure to reject the changes in writing amounts to a consumer’s silent acceptance.

   A groundswell of consumer complaints across the country moved Congress to pass the Credit Cardholders’ Bill of Rights, a new law that takes an unprecedented step to reform how the industry operates and to curb some of more costly hidden practices in the credit card industry. 

   Under the new rules, credit card issuers:

ß Can no longer increase the interest rate charged on an existing balance unless a cardholder is 60 days or more behind in payments or he or she has agreed to a variable rate. If a customer’s rate is raised because of a delinquency but he or she then pays on time for six consecutive months, the lender must revert to charging the previous, lower rate.

ß Must apply all payments made above the monthly minimum to pay down the balance with the highest interest rate.

ß Must use only the current month’s balance to calculate interest charges. This means issuers can no longer calculate interest using the average of a customer’s current and previous monthly balance, a method known as double-cycle billing.

ß Must stop charging over-limit fees unless a customer has been explicitly asked and has affirmatively said he or she wants to be allowed to exceed the credit limit and understands a fee will be incurred for doing so.

ß Must notify a customer 45 days before making a major change to the terms of a credit card contract.

ß Must give 21 days between the time they mail a bill and when they will impose a late fee.

ß Must limit fees charged during the first year a pre-paid credit card account is opened to no more than 25 percent of the initial credit limit. But this does not include late charges or over-the-limit fees.

However, issuers are still allowed to:

ß Impose many other, often hard-to-understand charges, such as fees on purchases abroad or penalties for having a zero balance.

ß Close accounts or reduce lines of credit without notice for any reason, although they must wait 45 days before they can impose an over-the-limit fee or a penalty rate on a newly lowered credit limit.

ß Arbitrarily change any or all terms for credit cards issued to small businesses.

ß Raise your interest rate without limit on future purchases as long as they give 45 days notice. If consumers don’t want to accept the higher rate, they have the right to close the account and pay it off over five years. 

ß Require cardholders to address grievances through mandatory arbitration rather than the courts.

   But Congress also gave the industry many months, until Feb. 22 of this year, to adapt to the new standards. Unfortunately, industry used that time to look for ways around the new law. Chief among them was to announce higher interest rates before the new law takes effect, in essence robbing many consumers of real reform this year.

   For example, since Feb. 22 arbitrary interest rate increases on existing balances are no longer allowed unless a person falls 60 days behind in making payments.

   But what Congress intended to make a practice of the past will continue for many because, in the intervening months, card issuers have imposed variable-rate floors on consumers. Many of these practices — which amount to tricks and traps to avoid reform — are outlined in a December report by the Center for Responsible Lending, entitled Dodging Reform, which can be found on our website at www.responsiblelending.org.

Sidebar: Tips for Credit Cardholders (139 words)

   How consumers manage credit is a personal decision, of course, but here a few tips to avoid unnecessary costs:

     * Keep due dates in mind, and mail your bills early enough to reach your lender by those dates.

     * Read credit card statements carefully and if you don’t understand a change that is being made, call your bank or, better yet, go to a retail branch and ask for an explanation.      

     * If your concerns aren’t resolved, file a complaint with your state’s attorney general.

     * Use cash whenever possible instead of credit for frequent purchases such as groceries or gas.

     * Limit transactions to those that can be repaid each month.

     * Shop around to see if another bank or credit union has a better deal, but also be wary. If a deal seems too good to be true, it probably is.