Chase, Citi Race to Bump Up Card Rates

Earlier this year, Congress voted to hold the credit card industry accountable for their stringent, often questionable card management practices, especially in the areas of fees and interest rates. Now, in a race to beat the clock, some card lenders are raising minimum payments JP Morgan Chase (Stock Quote: JPM) and increasing interest rates (Citigroup: Stock Quote: C) before the new rules go into effect.

Effective next month, Chase has sent out notices to customers that minimum monthly payments would rise from 2% to 5%. Chase isn’t exactly using a velvet glove here –customers can’t even opt out of the minimum payment because it doesn’t impact a cardholder’s interest rate.

Meanwhile, Citi has jacked up credit card rates for up to 15 million U.S. cardholders, joining a burgeoning number of US credit card companies who are aggressively hiking rates and minimum payment amounts, and cutting back on things like credit limits. Citi, Bank of America (Stock Quote: BOA); Discover (Stock Quote: DFS) and Chase are among major carriers who have either raised rates or increased minimum payments, or who slashed card limits in 2009.

The timing is hardly coincidental. On May 22, President Obama signed into law H.R. 627: the Credit Card Accountability Responsibility and Disclosure Act of 2009. Nicknamed the “Credit Card Bill of Rights”, the bill toughens consumer billing standards by credit card companies and restricts how they can raise fees and hike interest rates. For example, the bill stops card carriers from increasing interest rates on existing balances unless the borrower is at least 60 days late paying a bill. In addition, if the credit card customer pays on time for the following six months, the card company would have to restore the original rate.

But H.R. 627 has one big loophole – it does not take effect until July, 2010. That leaves a nine-month window that card companies are increasingly leveraging to sock it to card customers before the tougher rules go into effect. The card carriers say that in an environment where more and more cardholders can’t pay their bills, they need the money (credit card customer charge-backs rose to a record 10.44% in June, Fitch Ratings reports).

So, what can you do to fight back?