Another week, another credit card policy change. This time around the news is that American Express will dock rewards points for certain co-branded cards when a cardholder doesn’t pay on time. To get the points reinstated, cardholders will first need to pay the obligatory late fee and then an additional $29 to recoup docked points. The AmEx cobranded cards hit with this new policy are Delta Air Lines, JetBlue, Hilton Hotels and Starwood Hotels, putting them all in line with the same policy that’s been in effect for AmEx's regular Green and Platinum cards for years. But the timing of the latest announcements just adds to the pile of credit card cutbacks and fee hikes that has made 2009 the annus horribilis for cardholders. More

Five interesting stories from around the web:

• The U.S. unemployment rate cracked double digits this morning. Clusterstock takes a look at the cities where it is hardest to find a job. [The New York Times, Clusterstock]
• Report: Hundreds of credit cards are still using "unfair or deceptive practices." Cards are upping interest rates, penalties and fees ahead of regulatory changes coming in February.  [MarketWatch]
• Why do so many people fail at making a budget? It's because, according to Wise Bread, they omit a crucial task: Tracking what they spend. Here's a step-by-step guide to getting started. [Wise Bread]
• The National Association of Realtors' seasonally-adjusted pending home sales index rose for the eighth consecutive month in September, but Move.com says it didn't see its usual spike in listings last spring. The site says visitors are browsing, but not buying. [Hot Property]
• Princeton professor Daniel Kahneman discusses attitudes toward gains and losses, and why overconfidence hurts individual investors. [Nightly Business Report]

My daughter recently reached a dubious milestone in her life: She received her first credit-card solicitations in the mail. “A great rate is just the beginning …” read one of the offers, which were targeted at college students. Problem: My daughter is not a college student. She’s 12 years old.

My first reaction was to be angry at the mean, incompetent credit card companies trying to lure my tween into a life of debt. But as often is the case with parenting, and with finances, the story is more complicated than that. More

Okay, so that headline packs all the shock value of  "Sun Rises in the East." But given the widespread annoyance so many readers have with their credit card issuers (check out comments to blog posts here and here) I thought it might be, well, satisfying to know card wrath is a bit of a national epidemic.

J.D. Power reports that overall customer satisfaction with credit card issuers hit a three-year low, clocking in at 703 (on a scale of 1000) in 2009. That was slightly lower than the already anemic 710 score from 2008, and is the lowest showing since the firm started looking at credit cards in 2007. More

The first phase of a new law cracking down on the credit card industry went into effect last week.  Card issuers must now give consumers more notice when card terms are changed and an option to reject interest rate increases.

By next February, the most substantive changes in the new law will be in place, including banning card companies from raising interest rates on existing balances unless the borrower is more than 60 days late.

But there’s another key date to mark on your calendar:  May 22, 2010.

That’s when you'll see results of a study on an especially creepy practice by credit card companies, commissioned by a little noticed provision in the legislation. Credit card companies collect data on consumer spending from the millions of card transactions processed every day. Some of them analyze this data and use it to determine how credit-worthy you are.

The card companies believe that sudden changes in spending behavior and certain purchases may signal that you’re headed for financial distress. So, they use spending information to determine whether to make changes to the terms of your card, such as raising your interest rate or reducing your credit limit. What's unknown right now is what kind of spending can trigger changes, and how big of a factor it plays in determining who is a credit risk. But according to CreditCards.com, sudden cash advances, using your card at a second-hand clothing store, gambling at a casino or for bail bond services are the kind of spending that can raise a red flag. 

Of course, the card companies use the information for other purposes too, including marketing other bank products to you and to detect fraudulent activity on your card.

A fascinating piece by Charles Duhigg in the New York Times Magazine last year revealed that card issuers also use information on your spending patterns to customize communications strategies and develop psychological approaches to get card holders to cough up payments when they fall behind.

Thanks to the study mandated by the new credit card law, we’ll get a better idea about which companies engage in so-called psychographic behavior analysis and how they use that information. The Federal Reserve, the Federal Trade Commission and other banking regulators must deliver their report to Congress detailing whether credit card issuers engaged in this practice between May 2006 and May 2009 and whether that tracking negatively affected minority and low-income card users. Based on those findings, the Fed will also make recommendations on changes to existing credit card rules or laws to curb card company practices they deem harmful to consumers.

Of course, card issues may decide to halt the practice while they know they're being studied, at least while regulators are collecting the data. And it’ll take another law to eliminate the practice altogether.

Do you think it’s ok for credit card companies to track your spending patterns to look for risky behavior? Or does this all smack of too much Big Brother to you?

- Donna Rosato

Finally, some happy news for credit card holders. Late last week, Bank of America announced it will no longer require customers who sign up for their credit cards, bank accounts and certain loans to give away their right to sue in a dispute.

Bank of America’s decision is the biggest yet in a growing movement away from mandatory arbitration clauses, which force consumers who have a problem with a service provider into private arbitration forums to settle disputes. These forced arbitration clauses have become ubiquitous in consumer contracts, from cell phones and credit cards to nursing home agreements and employment contracts. Consumers have a lousy track record of winning in these private arbitration forums.

BofA’s change follows news in July that the National Arbitration Forum is halting hearing mandatory consumer arbitration cases (thanks to a lawsuit it settled with the Minnesota Attorney General that the NAF hid its ties to the debt-collection industry). The American Arbitration Association also announced it will halt debt collection arbitration cases until it overhauls its guidelines. In July, JP Morgan Chase also said it would no longer submit consumer disputes regarding credit cards to arbitration. According to USA Today, other credit card issuers, including American Express, are weighing similar moves.

While consumer advocates say the changes are a victory for credit card users, it doesn’t help customers of thousands of other banks, cell phone companies, and other service providers who are still forcing people into private arbitration to settle disputes. Still, the moves should give a boost to a bill pending in Congress called the Fairness Arbitration Act, which would eliminate mandatory arbitration clauses in most consumer contracts. This is an issue on the president's radar screen, too: In June, Obama called for an end to forced consumer arbitration as part of his financial market reforms.

Tell us: Have you ever had a dispute with a service provider that went to arbitration? How did you fare?

The credit card industry is on shaky ground right now, with banks fretting over recent legislation that will rein in some of their most abusive practices and a decline in credit card spending on the whole.

But Chase Card Services is hoping to win some customers back by unveiling its new Ultimate Rewards program Thursday. Similar to the Citi ThankYou Network or American Express Membership Rewards, Ultimate Rewards will serve as Chase’s flagship rewards platform.

The program allows cardholders to earn at least one point for every dollar spent. Points can be redeemed for cash, travel, merchandise, gift cards or statement credits through the rewards portal at UltimateRewards.com. Here's a closer look at the program:

The good:

•    There are no spending caps or tiers to earn rewards. So cardholders will get at least 1 point starting with the first dollar they spend, all the way to the last.
•    Points never expire, and there are no limits to the number of points that can be redeemed in a year.
•    There are several opportunities to earn more than one point per dollar spent. Airline travel booked through the Ultimate Rewards Online Travel Tool and paid with a Chase credit card will earn two points per dollar. Shopping through the Ultimate Rewards Bonus Mall can earn cardholders up to 10 points per every dollar spent.
•    Thus far, it looks like one point is worth about one cent when it comes to cash, statement credit and travel redemption—effectively, 1% back, which is a decent rate, given the times. Redeeming points for merchandise, however, will be more expensive. The fact that cashback is actually cheaper bodes well for consumers.

The bad:

•    Chase Freedom used to be one of MONEY’s top picks for cashback cards, when it offered 3% back in three of 15 categories (like groceries and gas) in which you spent the most each month. They got rid of that feature last year, opting for 3% back in categories that revolve each quarter, much like Discover’s Cashback Bonus Rewards program. With Ultimate Rewards, this will continue.
•    Cardholders who want to earn a fixed 3% back in the grocery, gas and fast-food categories must pay a $30 annual fee.
•    Cardholders must accrue $50 before a cashback check can be issued (though statement credits can be issued at any level).

The unknown:

•    The program’s travel tool, which can be used with points, cash or any combination of the two, boasts “no restrictions or blackout dates for airline travel redemptions.” Sounds good, though Chase spokesperson Rob Rosenblatt says that the tool ties into all the airline reservation systems, so it remains to be seen how flexible it will actually be.
•    Only two Chase cards operate on this platform (Freedom and the new Sapphire card for affluent Chase customers), though others may be added later.
•    While the two cards on the platform don’t require an annual fee, Chase is offering a Sapphire Preferred card for $95 a year. It will come with additional perks, such as the ability to transfer points to other travel rewards programs.

Given the cry from experts across the industry that rewards programs will all but shrivel up, the fact that Chase unveiled this program now is what makes it so noteworthy. "I think this could be a turning point for the reward cards market. There is some scaling back, but for the most part this issuer is trying to make its program competitive," says Curtis Arnold of CardRatings.com. "When a major issuer like Chase bucks the trend with this announcement, other issuers are likely to follow."

Consumers scored a major victory on Tuesday as the Senate voted overwhelmingly in favor of a bill that restricts unfair credit card practices. The Credit Card Accountability, Responsibility and Disclosure Act passed by a 90-5 margin. The bill comes on the heels of similar legislation, known as the Credit Cardholders Bill of Rights, that was approved by the House on April 30 in 357 to 70 vote.

So what happens now? The Senate bill heads back to the House for a vote, and there’s a good chance it could hit the President’s desk before Memorial Day. But what do both bills mean for your wallet? Let’s look at the key provisions:

Retroactive rate hikes: Both bills ban hikes to interest rates on existing balances. So say you carry a $1,000 balance at 8%. If the rate on your card changes, the new rate will apply only to new purchases going forward—the issuer won’t be able to start charging 19% on the previous balance. The only catch: If you fail to comply with a debt repayment workout plan or if you are more than 30 days (House bill) or 60 days (Senate bill) late on payments, all bets are off. What’s more, both bills prevent issuers from raising your interest rate during the first year of the card account.

Penalty periods: If you are late and your rate goes up, the Senate bill states that if you pay your bill on time for 6 months in a row, you can reclaim the lower rate.

Advance notification: Time was, your issuer could jack your card’s rate and only give you 15 days notice. No more. Both bills require that issuers must give you 45 days notice before making significant interest rate, fee and finance charge increases.

Teaser rates: Both bills require that promotional rates must be offered for at least six months.

Payment allocation: You may have a balance transfer on your card at one rate, while other purchases or balances accrue interest at a different, higher rate. Before this legislation, banks could apply your payment to the balance with the lowest interest rate first—so your more costly balance just kept racking up interest. Now, payments in excess of the minimum amount owed must first be applied to the balance with the highest interest rate first, and then to remaining balances in descending order.

Due dates: Credit card statements must be mailed 21 days before the bill is due, up from the current 14. And no more odd timing deadlines for payments—payments received by 5 p.m. on the due date are on time. Payments with due dates that fall on holidays or weekends must be accepted by the next business day.

Over-the-limit fees: Before, if you tried to charge above your credit limit, the issuer would approve the transaction and slap you with an “over-the-limit” fee. Now, consumers must opt in for over-the-limit approval—and the fees that come with it.

Cards for young adults: The House bill stipulates that banks can’t issue cards to un-emancipated minors under the age of 18 unless a parent is the account holder. It also limits college students to just one credit card, sets credit limits to a percentage of the student’s income and requires parents to approve increases to credit limits on joint accounts. The Senate bill takes it even further, eliminating credit cards for people under the age of 21 unless an adult co-signs or they can show proof of income.

Gift cards: The House bill doesn’t touch them, but the Senate bill states that gift cards can’t expire in less than five years. Retailers selling Visa, MasterCard, American Express or Discover-branded gift cards will have to print information on dormancy fees—charged when the card goes unused for a while—right on the cards themselves.

Universal default: Both bills eliminate this practice, which allows a card issuer to raise your rates if it learns that you were late on another card.

Account closings: The Senate bill doesn’t address it, but the House bill requires an issuer give you 30 days notice before it closes your account.

Many of the provisions in these bills are already addressed in the Fed's credit card regulations, which are slated to take effect in July 2010. Will this legislation make it happen sooner? The House bill was scheduled to take effect 12 months after passage, while the Senate bill planned for nine. We'll keep you updated on what the final law looks like–and when you might start benefiting from it.

Your credit score is like your reputation: It takes a long time to build up, but just one mistake can knock it down. A late credit card payment, for example, can cost you several points. And now, when a mere 20 points can make the difference between the best rates on car loans and mortgages, it's important to pay attention to all the factors that could pull you up–or down. An easy way to keep your score in tip-top shape is to pay your credit card bills on time and keep your debt-to-available-credit ratio low.

But what about corporate credit cards? If you've got a job, there's a chance your employer had you sign up for a corporate credit card for approved work expenses. But what if your employer is late paying the bill? Or you've had a month of hefty work charges such as airline and hotel bills that could inflate your level of debt?

"If your corporate card's activity shows up on your credit report, then yes, it's going to impact your score," says Craig Watts, a spokesperson for Fair Isaac.

That got me wondering–was the corporate American Express issued to me by my company appearing on my credit report? I checked it out, but it was a little confusing. My credit report from Equifax indicated that American Express made an inquiry into my report when I started this job, which makes sense. I remember having to fill out some paperwork to apply for the AmEx, so I'm assuming American Express wanted to check me out to make sure I wasn't a deadbeat.

But when I looked into the revolving accounts listed on my report, American Express was nowhere to be found, though all my other credit cards were. Puzzled, I called the folks at AmEx to get the scoop. Turns out, American Express pulls the credit report for any employee who is going to be issued a corporate card to make sure that employee doesn't have a derogatory credit history. "If you do," says Gail Wasserman of American Express, "we might ask your company to guarantee your charges."

But beyond that, American Express does not report your corporate card's activity to the three credit bureaus. Of course, every company has a different policy on how it pays for expenses charged to a corporate card. Some might have the employee make the payment and issue a reimbursement, while others pay the card off directly after an expense report is submitted. None of that matters to American Express–they're not going to report a late payment or high balance to your credit report. (Of course, if you're 45 days late making a payment, AmEx will now slap you with a $39 fee, up from $29. That's enough to get me to submit my expense report on time–because my employer certainly won't pay for that.)

So does that mean you can get away with charging up a storm or never paying your corporate AmEx bill? Hardly. If an account is six months past due, all bets are off. American Express will notifty the credit bureaus of your delinquency in that case. "After 180 days, you’ve had plenty of time to go back to your company to get reimbursement. So if you bought something they denied, that’s between you and your company," says Wasserman.

American Express issues 7.1 million corporate cards around the world and handles 60% of Fortune 500 companies, so there's a good chance your corporate card is with them. But what if your company has, say, a corporate MasterCard issued by one of more than a dozen banks around the country? Or from another card issuer who uses Visa or Discover? Then it depends on that issuer's policy. To find out if your corporate card usage will impact your credit score, look at your free credit report from annualcreditreport.com. If the corporate account is showing up under your revolving accounts, you have your answer. If you're still unsure, call the isssuer directly. But chances are, your personal credit score won't escape major corporate card delinquencies unscathed. So get those expense reports in on time.

Last Thursday executives of the nation’s leading credit card companies were summonsed to the principal’s office and told to clean up their act. Actually, what President Obama told them was that he intended for Congress to come up with some new consumer-friendly legislation to address what the President referred to as abusive practices.

From the President’s post-meeting remarks:

“…we want to preserve the credit card market. But we also want to do so in a way that eliminates some of the abuses and some of the problems that a lot of people are familiar with — people finding themselves starting off with a low rate and the next thing they know their interest rates have doubled; fees that they didn't know about that are suddenly tacked on to their bills; a whole lack of clarity and transparency in terms of the terms and conditions of their credit cards.

And so there's going to be action in Congress. Our administration is going to be pushing for reform in this area.”

What's interesting is that reform is on the way…albeit on a slow boat that will not arrive until July 1, 2010. Last December the Federal Reserve and other regulatory agencies that oversee the card industry pushed through some tangible pro-consumer changes in how credit card companies can levy fees and change the terms on cards. But in one of the slowest roll-outs in memory, the new regs were given an effective date 18 months down the line. Ostensibly the delay is to give the credit card industry time to make all the technological switches to their systems to comply with the new rules. But the lag time is also allowing the credit card companies to bring in more revenue today by continuing their rate-changing ways before the new rules arrive in July 2010.

One of the hallmark changes that will go into effect is that if you make your payments on time, your credit card company can’t change the interest rate on your existing debt; any rate increase can only be applied to new debt you pile up after receiving notification from your credit card company.

But until July 1, 2010 the card companies can continue to jack up rates on existing balances, at will. And as my colleague Donna Rosato noted in a recent blog post they are indeed pulling out all the stops to collect card revenue, including raising rates on even “good” clients. That's not too surprising given the tough economy that has spurred a big uptick in credit card delinquencies. And that makes it all the harder to imagine that the credit card industry is going to roll over and agree to more pro-consumer legislation in this current environment. And let’s be clear: we are talking about one of the most powerful and effective lobbies in D.C. This is shaping up as an interesting battle on Capitol Hill.

– Carla Fried