Today, the House of Representatives passed a credit card bill that will make it tougher for credit card issuers to raise the interest rate and fees on your credit card. This is a fantastic frugal feat. Ever since the fall of the market and the investment banks, consumers have been leaving behind homes to foreclosure and defaulting on their credit cards. Since credit cards are an unsecured debt, if a consumer files for bankruptcy, the credit card issuer will be the last creditor paid…they stand behind the mortgage lender and the lien holder of a car. That leaves the rest of us to supplement the interest money lost by the credit card issuer.

To make up this difference, credit card issuers have been slowly running through their customer database and selectively raising the interest rate on outstanding balances for customers who are actually doing their part of paying their bill on time. If you’ve watched the news lately, I’m sure you seen a news story detailing a family who’s bread-winner has recently lost his job, yet the family is still making their minimum credit card payments only to receive a letter in the mail stating that their 9% interest rate has been increased to 14%. To put this in perspective, if you had $10,000 worth of credit card debt at 9% interest and you paid $250.00 per month, you would pay $1,933 in interest and have it paid off in 4 years. Now let’s raise the interest to 14%. This increases the amount of interest you would pay to $3,548 and increases the pay off time to 4 years and 7 months. A difference of $1,615 in interest. Now multiply this amount by 200 customers. That is over a quarter of a million dollars ($323,000) over four years. And you know each credit card issuer has more than 200 customers to tool around.

This bill would ban rate hikes unless a customer is more than 60 days late on a payment. Historically, credit card issuers could raise your rate as soon as you were even one (1) day late. Read about the bill from the article Key Provisions of Credit Card Reform Bill at MSNBC.com. This bill does not go into affect until nine (9) months after President Obama signs it. So, in the meantime, and in the future, continue to pay your credit card on time. And cross your fingers that your credit card issuer doesn’t single you out from the bunch.

photo by The Consumerist