ST. LOUIS, Dec. 26 - New Credit Card Legislation is not in favour of Credit Cards companies. New Credit Card Legislation goes into effect February of 2010. Credit Cards companies start hammering on consumers due to this legislation. Financial blog, ChristianPF.com released an article discussing the effects of the new Credit Card Legislation.

Credit Card companies are already adapting and trying to find new ways to minimize risk and hang onto profit margins. Consumers may have already started to feel the effects of it with higher interest rates and lower credit limits.

According to the article carrying credit card debt into 2010 is a bad idea for two reasons:

1. Interest rates: In response to the new credit card legislation that will go into effect February 2010, credit card companies have raised credit card rates as well as changed them to variable rates. ANY new debt created in this environment could end up being extremely expensive. The problem is that those variable rates are tied to a benchmark, and that benchmark has nowhere to go but up. As a result, the cost for holding debt for consumers will greatly increase over time.

2. Reduced credit limits: In response to the new credit card legislation, credit card companies have sought to reduce their own risk by reducing consumer credit card limits. As a result, credit scores can be drastically affected. One aspect of credit scoring is the credit utilization ratio. This formula looks at total overall credit that has been issued to a consumer and the amount of that credit the consumer is utilizing.

An ideal credit utilization ratio is less than 30%. For example, take the consumer that has $10,000 in total credit limits. If that consumer has 8,000 of debt on those credit limits, then the consumer is utilizing 80% of their credit limits. If the credit limits in this case are lowered to $8,000, their credit utilization ratio becomes 100% which would have a much more negative effect on the credit score.

What options do consumers have?

For credit card users finding themselves in these precarious situations, the best bet is to try to negotiate your credit card interest rates with the credit card companies.

Negotiating has become decreasingly effective over the last year, but it is still worth a shot. After that, the obvious next step would be to take the necessary steps to pay off consumer debts.

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