While many analysts expected credit card companies to cut back on perks for customers, CNN Money is reporting that in many cases banks are aggressively increasing their paybacks.

The perks are popping up by as much as 25 percent for reward points and a whopping 60 percent for some cash back programs.

Why are the credit card issuers suddenly in such a giving mood? They are hoping the increased perks and points will help retain big spending customers who are less likely to default on their credit card debts.

While credit card companies earn money off the interest on customer’s balances, they are increasingly earning more from the transaction fees collected when you use a card.

Banks are hoping by increasing the benefits they’ll improve customer loyalty and retention. Also, they hope the new points and rewards, which are tied to spending, will encourage their most responsible customers to spend more. (More transactions = more fees).

A closer look at the reward updates reveal:

• American Airlines cards users with Citibank will now earn 1.2 miles for every dollar spent, up from 1 mile per dollar.
• British Airways card holders with Chase will now earn 1.25 miles per dollar spent, up from 1 mile per dollar.
• Chase Freedom Card users will now get 5 percent cash back on certain purchases, up from 3 percent for the same categories

If you’re one of these card holders be sure to take advantage of your new rewards.

If you’re considering getting credit card rewards be sure to read the fine print and get fully informed on the costs of the card. Some rewards cards come with high annual fees, and you’ll want to weight the benefits before signing on.

The New York Times has the report, calling the development the end of “$40 cup of coffee.”

Before the recent credit card reform, overdraft protection was a “service” offered by most banks. Customers were often automatically given the service, which would charge them a fee to allow a purchase to go through even if they lacked adequate funds in their account.

However, this practice caused many problems for consumers. For example, if when buying coffee consumers went only one cent over their account limit, they could be hit with a $40 fee.

Banks claimed their service protected the consumers from the “embarrassment” of having a card declined. But, Bank of America said their customers only wanted the protection when it came to bill payments, such as mortgages. From the story:

“What our customers kept telling me is ‘just don’t let me spend money that I don’t have,’ ” said Susan Faulkner, the bank’s deposit and card product executive, who said the overdraft changes were part of a broader push to build trust among its customers. “We wanted to help them avoid those unexpected overdraft fees.”

But those fees are big business for banks, generating almost $20 billion for banks last year.

Bank of America is the country’s largest issuer of debit cards, but it is unclear if other banks will follow their lead.

This is just the latest of many changes in the credit card and debit card industry since the new credit card laws were passed in May of 2009. The laws required banks to only offer overdraft protection to customers who opt in to the service. If you’re not sure whether you opted in to this service, check your most recent credit card bill or contact your card company.

When times get tough, many people are inclined to cover up what they hope will only be short-term debts.But not being open about your debt relief needs may compound the problems.

CNN highlights the strain this put on a couple in Texas. The husband runs a non-profit that focuses on teaching financial literacy, but his wife had a growing problem with credit card spending. She took a line of credit with plans to pay off overtime her purchases of clothing and toys for her children. But as she let the debt ride from month to month, interest and new spending mounted and quickly got out of control.

When the husband ran the couple’s credit report, everything came to the light of day. The couple then had to sit down for some heart-to-heart conversations.

Hidden credit card debt may also become a burden outside of marriage if you’re keeping your struggles from other family members. A major side effect of out-of-control debt may be increased stress and health problems. Keeping your debt a secret may only make things worse.

In one example from CNN, a son who was doing some investing for his mother went so far as to forge receipt documents so she wouldn’t know how much money she really lost. Those type of secrets can take a real toll.

So what should you do if you find yourself suddenly in over your head?

1. Be open and honest with yourself and others. Particularly if your finances affect others, be honest about your situation. Hiding your credit card debt may only increase your stress, complicate the problems and keep you from taking real action.
2. Explore your options. Even if you feel helpless, it’s important to know there are debt relief options out there. What’s more, there are many different types so there is a good chance you’ll be able to find something that fits your needs: From Chapter 7 bankruptcy to adjusting your monthly budget.
3. Take action. Your debt won’t magically disappear if you sweep it under the rug. Confront it head on.

Using internal data, FICO is a growing trend that Americans are paying off their credit card debt before paying off other bills, including their mortgage. This is a reversal of conventional wisdom and prior trends, which showed that Americans took care of their home first.

In fact, FICO information shows that despite the ailing economy, people were less likely to fall more than 90 days behind on their credit card debt than they were just a few years ago.

Mark Greene, CEO of FICO, looked at these numbers and said: “We suspect another reason is that credit cards are increasingly important to people.”

He also pointed out trends showing that consumers are using credit cards to make ends meet. For example, he pointed to last month’s numbers which show that 10 percent of credit card holders used their card to buy groceries.

However, consumers aren’t paying these payments off the next month. Greene said they are rolling this purchase into revolving debt and keeping them on their statements.

These people will then be paying interest on basic and essential purchases, which can, in the long-term, put a serious strain on personal finances. If interest rates get high enough, some consumers may be forced to file chapter 7 bankruptcy because these small purchases added up and got out of control.

Still, it seems consumers find themselves with little choice when the jobs are lost or paychecks shrink. Credit cards aren’t just used for big purchases anymore. For many people, they’re becoming essential to getting by.

Signed last May, with some parts slowly taking effect over the last few months, the full force of this law kicks in today.

Credit card companies began adjusting to the laws last fall, but you should still keep a close eye on your credit card statements over the next few months to hold the companies accountable and ensure they are following the law.

Most news outlets, including the Associated Press, are providing consumers with a full run down of the changes. Here’s a summary of the new laws, how they might affect you, and what you should keep in mind when exploring new cards.

More stable interest rates. Interest rates have not been capped, but there are more limits on how and when a card company may change your rates. If a card company is to change your rate, you must be given 45 days advance notice before it kicks. Also, the rate on existing balances can’t be raised unless you’re 60 days or more overdue. Previously, a card company could change the interest rate on past debts on short notice, leaving you stuck with a quickly ballooning bill. Now, if you don’t like the new rate you may cancel your card, and be responsible only for your old debt at the old rate.

Other changes: Interest rates can’t be raised during your first year of card ownership, and any rate hike must be reviewed every six months to see if it is still justified.

Fees capped and reduced. In response to credit cards that had higher fees than credit lines, service fees are capped at 25 percent of the credit limit during your first year with the card. This includes activation and annual fees.

You must also now opt-in to over-the-limit fees. Companies have long charged big fees when you exceed your credit limit under the guise of protecting you from the embarrassment of having your card declined. But many consumers never asked for this “protection.” Now, you’ll have to agree to these fees. However, be aware of fine print and pop-up agreements.

If you do agree, these fees may only be assessed once in a billing cycle, and they may only be triggered by purchases, not other fees or interest charges.

More notice. Your due dates must remain constant, and your statements must now be sent out 21 days before the due date. As stated above, you must be given at least 45 days notice of a rate increase on your card. Also, your statements will need to include information about how long it will take to pay off your credit card debt if you only make the minimum payment.

The big credit card companies have been testing new offers and making adjustments to terms as they try to find new ways to make money under the new laws. The most commonly affected areas: Interest rates, annual fees and rewards point.

So it’s possible you’ve seen some significant changes in your credit cards. And, you may have even received new offers from companies hoping to lure you over with an attractive balance transfer offer.

A balance transfer is an old tactic companies use to try to get you to switch your business. For example, if you have a Visa card with Chase, CapitalOne may offer you a “balance transfer” special to move your Visa account to them.

Typically, these offers include no interest rate for a certain period of time, like one year or six months. This may seem attractive, particularly if you’re paying high rates now.

But, as always the case with credit card debt, the fine print is important.

Beware of Balance Transfers

Before you agree to a balance transfer, pay close attention to:

Your new interest rate. While zero percent interest for a year might be great, what will your rate be when that time is up? In just a few months you could end up with a higher rate than before the switch.

Balance transfer fees. Typically, a company will charge you a balance transfer fee to switch your account. This fee used to be 3 % of the debt with a cap of $75 or $100. However, Forbes is reporting that many card companies are raising this fee to 4 or 5 percent. Also, Forbes says they are removing the $100 cap, meaning you’ll have to pay for the full percent.

Zero Interest Period. Here’s a classic case of fine print. You may be lured in by an offer of “12 months’ of free interest, but, according to Forbes, these are often best case scenarios. The offers are usually for “up to” 12 months, meaning you may actually get a much smaller interest free window.

According to a report from the Financial Times, major credit card issuers Citigroup and other is having difficulty selling their unwanted assets in an attempt to improve their balance sheets. Other companies are also trying to get in on the act.

Among the troubled assets that Citigroup wants to offload are car loans worth upwards of $3 billion. According to the Financial Times’ sources, Citigroup has been in talks with private hedge funds and equity groups about their sale. Bankers close to the situation report that initial reactions in the talk are “promising,” which may be in some part due to Citigroup’s incentivizing, which could include providing several years of financing for the asset purchasers.

Some of Citigroup’s loans have already been securitized by TALF, term asset-backed securities loan facility, which is a government program that provides support for the securities market, which has been in poor health during the financial crisis.

There are those who do not share such a rosy view of the market for such troubled assets, however.

Some private equity groups and hedge funds told the Financial Times that there is not enough market to support the sale of securitized bonds like the ones in question. These bonds are backed by cash flow from the loans themselves, which could possibly make them less attractive to buyers.

There has also been some concern that a securities market in trouble, and being bolstered by the government, could lead to trouble for securities buyers who find it difficult to maintain financing after Citigroup’s financing offer comes to an end. Such uncertainty will not likely help Citigroup and other financial firms sell these bad assets and get their books back on track.

The head of a large private equity firm spoke to the Financial Times, telling them that “private equity can’t make a bid on anything where the business model requires a bet that the external funding markets and securitization comes back.” The system, in other words, may not be healthy enough for buyers to gamble that it will recover.

The securities market played a large role in the economic crisis and chapter 7 bankruptcy growth, as many loans were gathered into bundles that could be easily bought and sold on the market.

As the demand for these bundles increased, more mortgages and loans were handed out. When many of these excess loans went into default, the result was a domino effect from which the securities market has yet to recover.

Government programs have propped up the market to some degree of late, but these programs are set to expire soon, and the market itself has not reemerged completely.

There are also new rules that require banks to include securitized loan bundles on their balance sheets, and that therefore capital has to be allocated to them.

Citigroup was the recipient of a massive government bailout in 2008, during the global financial crisis. The U.S. government became a 36 percent shareholder in early 2009, though that share has decreased since then in large sales of common shares. Citigroup has since repaid $20 billion in government bailout money.

Reuters reports on a new survey that shows Americans are shifting their priorities when deciding which debt to pay off first.

More Americans are choosing to pay off their credit card bills before their mortgage debt, according to the survey credit bureau TransUnion:

“The percentage of consumers delinquent on mortgages, but current on credit cards rose to 6.6 percent in the third quarter of 2009.”

This is a continuation of a trend that started in early 2008, when the rate was at only 4.3 percent. At the same time, fewer Americans were delinquent on their credit cards while current on their mortgage.

This trend was even more pronounced in some of the states hit hardest by recession. In California and Florida more than 10 percent of residents were behind on their mortgage while current on credit cards.

Experts said in the Reuters report that conventional wisdom says consumers will pay off their secured debts, like a house and car, first.

But, as one expert said in the piece “You cannot buy groceries with your house.”

They speculate that by paying off their credit cards first, people are able to sustain their daily lives – buying gas and groceries – while their homes slowly sink underwater.

This may be bad news for an already battered housing industry, but most folks are only worried about what’s best for them.

In the event that a home or car is threatened by foreclosure or repossession, many consumers are turning to Chapter 7 bankruptcy, which may be able to protect such property even if foreclosure already started, the debts are high and the mortgage costs more than the house is worth.

So which is it for you? When your paycheck can only cover one bill, which do you pay? Credit cards, mortgage, car or something else?

One thing is certain: The new laws will change how we interact with credit. They already have. As early as last fall, people began reporting on interest rate changes, new annual fees and changes in reward points.

But the new laws may also change who has access to credit. For years, young adults on college campuses were specifically targeted with starter credit cards. Just barely an adult, by the age of 18 or 19, some students had access to thousands of dollars in credit.

On the Huffington Post, Jerry R. Welch takes a look at what he calls the “plastic gap.” This is his term for a group of people who may see their access to credit cards dry up, and could face a lack of services in the wake.

His example? Online purchasing. A credit or debit card required for almost any online purchase. Don’t have one? Sorry.

The people most likely to be left out are the underbanked – those people without access to banks or checking accounts – and the under-21 crowd.

College students may only have modest or irregular income. But, as Welch says, even if they are capable of making timely payments they may be unable to obtain traditional credit cards.

Welch sees this need being filled with prepaid credit cards. These cards, like Green Dot, are available to anyone, regardless of credit history, and function just like traditional credit cards. Consumers pay for the cash on these cards up front, and some may be regularly reloaded, allowing consumers to keep the same card number for extended periods. From his blog:

Even before the recession, general purpose reloadable prepaid cards were already used by many of the more than 73 million unbanked and under banked consumers in this country as a low-cost alternative to a traditional bank account. Dwindling credit card limits have led millions more to use reloadable prepaid cards as consumers continue to scramble for alternatives. The new credit restrictions on young people will help significantly increase the number of those who make prepaid their No. 1 option to fill the burgeoning “plastic gap.” In 2008, transactions on reloadable prepaid cards totaled more than $4 billion, and forecasts show that number will increase to $12 billion in 2010.

That’s a big increase in usage and demand, but prepaid credit cards aren’t a perfect solution. For starters, to get on you will need to pay up front, often times more than you are willing to spend. Like traditional credit cards, prepaid cards typically have fees, including activation and monthly usage fees. In some cases, the fees to get a card turned on and usable are more than the card can carry.

In many ways, you may want to treat these prepaid credit cards just like you do a regular credit card. Before signing on, do your homework. Read the fine print and get all the details about potential fees you might encounter. If the price is right, these could be a nice alternative for people without access to traditional credit.

However, your use of these cards may not be reflected in your credit report. So while they may not directly affect your efforts to rebuild your credit after filing chapter 7 bankruptcy, they may help you develop responsible spending habits.

It’s all about finding affordable products that work for you. There are lots of new options out there, and they will each require you to mind the details.

The state’s attorney general launched a probe of several debt settlement companies contacting residents.

Debt settlement or debt negotiation are often used by people with serious credit card debt who can’t make bankruptcy work. For example, if you already filed Chapter 7 bankruptcy once in the last 10 years, you may not be eligible to file again.

But debt settlement does work for many people. That is, when it’s done properly.

But the following the investigation, several of these companies are offering cash settlements to consumers and will stop operating in the state, ConsumerAffairs.com is reporting.

Clear Financial Solutions, Financial Freedom and Financial Solutions Legal Center will pay more than $214,000 to 226 residents. In many cases, these companies put charges on consumers’ credit cards without providing a service.

This is a reminder that you should do your homework before committing to a debt relief plan. Also, keep in mind that bankruptcy is a secured legal action, but a private company may not be held to the same standards.

Also, if a debt settlement agency charged you without providing services you may have some recourse. The complaint in West Virginia was started by consumers.

In a blog on the Huffington Post late last week, New York Rep. Carolyn Maloney outlines that certain notification requirements have already kicked in, including some requiring 45 days notice when changing an interest rate. She writes:

“Any notice of a rate increase to existing balances under the new credit card law must be dated no later than (Jan. 7), 45 days before the February 22nd enactment of the bulk of the Credit CARD Act.”

So be sure to pay extra special attention to your next credit card statement. Most of the big credit card companies should be complying with the news, but it’s your job to hold them accountable. In some cases, this means looking at post-mark dates as well as the fine print in your credit card bills.

Rep. Maloney also mentions these other changes with the new law, so be on the look out for these as well:

Penalty rate increases for those less than 60 days overdue on their payments are banned.

Over-limit fees are allowed only if companies obtain an affirmative opt-in in advance from the customer–and must be reasonable and proportional to the cost.

Prohibits charging interest on debts paid on-time (Double-cycle billing).

Bans due-date gimmicks such as setting morning times for payment, before mail is delivered or charging fees for paying a bill by phone or internet.

Rep Maloney also reminds consumers of the purpose of the new 45 day notice window. If you receive terms that you don’t like, this time can be used to shop for a new card, close the account, or make a plan to go without a card. If you opt-out of the terms, you will still be responsible for the balance, but you can pay it off at the old rate.

In order to make sure your valuable gift card dollars don’t go to waste, consider these tips for maximizing their benefit.

• Buy what you need. Those of us who have had to pinch pennies or cut back in some way since the recession began would do well to treat gift cards like normal money. That means using them for necessities rather than items we wouldn’t have bought otherwise. Cards redeemable at a variety of retailers are especially handy for this.
• Keep track of the plastic. Rather than tossing a gift card aside or piling it with other gifts, keep in it a safe place like your wallet or with other gift cards. Losing a gift card is the same thing as losing cash.
• Go over the limit. The chances that you’ll find something you need for the exact amount your card offers are slim. To make sure you get the entire benefit from the card, spend a bit more than its value. That way, nothing goes to waste.
• Work the sales. In the weeks following Christmas many stores have excellent sales, and if you hit the shops sooner rather than later you may be able to avoid picked-over or under stocked merchandise. Plus, discounts will allow you to make the most of your gift card.
• Get what you really want. If you’ve gotten a card or cards to a store you don’t particularly like, considering visiting a site like CardHub.com or getting together with friends to exchange your card for one you really want.
• Watch the expiration dates. Read the fine print on your cards. Credit-card “cash cards” usually carry and expiration, and some store cards may expire too, or lose some value.

When You’re Giving Gift Cards

Gift cards are often a great option when you know the recipient likes to shop or has picky tastes, but make sure you know what you’re getting when you buy one. You and your loved ones can save money with a little up-front research.

Some credit card branded gift cards, while versatile, have several-dollar activation fees that can seriously cut into the amount of money you want to give ($6 is common). Also, just like your credit cards, many of these cards have expiration dates, though they are typically good for a year.

Store-specific cards generally avoid such fees, so if you know where a loved one likes to shop, that may be your best bet. Also, keep in mind that some stores have more versatile offerings, and a gift card to a Target or Wal-Mart let the recipient choose from the fun to the frugal when shopping.

Additional Credit Card Reading:

Comments on Proposed Rules on Gift Card Provisions in Credit CARD Act

The report, conducted by Moodys, shows:

• After a few months of catching up, credit card debt is catching up to more people once again
• People are making smaller payments on their credit card bills
• More credit card bills are 30-180 days late
• People are carrying less credit card debt – but they’re still behind

The charge-off rate counts credit card debts “written off as uncollectable” by the credit card companies. This measurement is a good reflection of how many people are falling dangerously behind on their credit card bills.

For November, the charge-off rate was 10.56 percent, close to June’s record high. That’s an increase of one half a percentage point after two straights month of decline.

The same survey, done by Moody’s, also shows a slight increase in the delinquency rate. A credit card is considered delinquent if the payments are 30-180 days late. What’s more, the report also finds that people are making smaller payments on their bill, and paying down less of the principal.

Moodys expects delinquencies and late payments to continue through the winter. Holiday shopping bills will hit the mail in January, and the extended unemployment benefits are beginning to run out for many workers laid off last fall. These could combine to form some serious credit debt problems.

In 2008, the US Mint began making $1 coins. A few commemorative coins with the likeness of several US presidents were sold to collectors. The cost? $1 of course. But there was a limit, and investors and collectors could only purchase 500.

But there was no limit on how many $1  Sacagawea dollar coins could be purchased at the price of $1 each. UPI reports on a few credit card users who exploited this flaw to their advantage.

Over the last two years 75 credit card holders purchased large amounts of the coins, buying $1 coins for face value. These card holders earned massive amounts of rewards points they could trade in for airline tickets and other goods.

When their cash order arrived they turned around and used that money to pay off the balance of their credit cards. Reward points for nothing.

UPI reports that the US Mint has since reclassified the collector coin purchases as “quasi-cash,” which will make them ineligible to earn points on most credit cards.

That measure was blocked in the Senate, but Bloomberg.com is reporting that two Democrats in the House are trying to push through a bill that would set a strict cap on credit card interest rates and fees.

Louise Slaughter of New York and John Tierney of Massachusetts proposed a new set of credit card rules which would include the following:

• Interest rates capped at 16 percent on credit cards
• Late fees and over-the-limit fees capped at $15

Back in May, while Congress was debating the new set of credit card laws, a 15 percent interest rate cap was rejected.

But for many people, a 16 percent interest rate would be an improvement. Said one of the new bill’s sponsors:

“We must do what we can to help people who are trying to make ends meet in the face of card rates that suddenly jump to 20, 25, 30 percent or even more,” said Slaughter, chairwoman of the House Rules Committee. “It’s time for Congress to put the needs of people ahead of banks and card issuers.”

We’ll keep an eye on these measures and let you know if they pass.