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New breed of credit cards could offer savings — for the sharp-eyed, that is

By Candice Choi
Associated Pres / January 14, 2011

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A new breed of credit cards is on the way for 2011. Tighter regulations, cutting-edge technologies, and a growing willingness by banks to lend again are just some of the factors reshaping the credit card industry. For sharp-eyed consumers, the changes could present an opportunity to significantly lower monthly expenses. Here are the key trends to watch:

■ Cards come knocking: Card offers are cluttering mailboxes again. Mailings almost doubled to 2.7 billion last year, according to market researcher Synovate. Solicitations hit their lowest volume in more than 16 years in 2009. The offers are expected to continue piling up, particularly for anyone with a strong credit history.

Those with less-than-stellar payment records have lost their luster for card issuers. New regulations limit how much card issuers can profit off of less reliable customers.

Late fees are generally capped at $25. Card issuers can no longer raise interest rates without warning. And monthly statements spell out the cost of carrying a balance, which is intended to motivate customers to pay down debt rather than rack up interest charges.

So even as banks and credit unions start soliciting new customers again, they’re not about to rubberstamp approvals. The focus will be on big spenders with good credit.

■ Incentives to switch: Balance-transfer offers are getting more generous. The idea is that customers can lower their interest expenses; cardholders are typically given a 0 percent rate for an introductory period for switching allegiances

In the downturn, those periods were cut in half to about six months and sometimes even to as little as three months. But now issuers are expanding introductory periods to about a year again. The fees on balance transfers, which had gone up to 5 percent, are now back down to about 3 percent, according to LowCards.com.

■ Rewards get complicated: Richer rewards are another way card issuers are trying to attract customers. But they’re also passing on the costs through higher annual fees. The result is that comparison shopping for rewards cards is going to be a lot more complicated.

■ Higher interest rates: Even as card issuers compete, expect rates to be higher. The average recently was 14.4 percent — up from 10.8 percent two years ago, according to Bankrate.com. One reason? New regulations prohibit card issuers from raising the interest rate in the first year of an account. “So what issuers have done is raise the rates before you apply,’’ said Bill Hardekopf, chief executive of LowCards.com.

■ Going high-tech: Banks and credit unions are continuing to expand their mobile-banking options. Expect them to go high-tech with credit cards, too. Bank of America, for example, started testing contactless credit card payments in New York City last month.

Candice Choi writes for the Associated Press.