Your Losing Hand

There are several key protections under consideration. One rule would forbid a common practice called double-cycle billing, which results in cardholders paying interest on debts paid off the previous month during the grace period.

The regulators are going after fees charged for subprime credit cards, which target people with poor credit histories. Credit card companies would be prohibited from charging fees that amount to more than half of the credit being offered. The proposal would also require financed security deposits and fees exceeding 25 percent of the initial credit limit to be spread over the first year.

Credit card issuers would be required to apply the payments that cardholders make to balances with different interest rates in a way that benefits customers and not the companies' bottom lines.

Currently, many lenders will take a payment from a cardholder and apply it to the debt with the lowest interest rate first. For example, suppose you transferred charges from one card to another and the new card has a 0 percent interest rate. If you make any new purchases, let's say you're charged 9 percent. In an effort to pay down the debt carrying the higher rate, you decide to send in an extra $100 above the minimum payment.

However, the card company may apply the $100 to the balance transfer with the 0 percent interest rate. That payment allocation method works in the favor of the credit issuer because the cardholder continues to accrue interest on the debt at the higher rate.

"If, as the Fed proposes, payments must be allocated to the higher-rate balance first, or blended proportionally, the consumer can much more quickly reduce the higher-cost debt," Mierzwinski said.

The most notable recommendation would prohibit lenders from increasing the interest rate on pre-existing credit card balances. The regulators would allow some exceptions, such as when a cardholder is more than 30 days late in paying the bill.

Even with the exceptions, this proposal is a significant change and one the banks will surely fight. The American Bankers Association is particularly perturbed about the retroactive interest rate ban, arguing it would "greatly restrict the ability of card companies to charge interest rates that reflect the risks of different consumers."

"If card companies cannot fully reflect risk, then millions of consumers with good credit histories will end up with higher rates," the association said in a news release. "The proposal would also have the likely effect of ending zero- or low-interest balance transfer options."

Already the lenders are signaling that they'll find a way to put the odds back in their favor.

This will always be their game.

Although regulators are proposing to eliminate some of the more unsavory practices of the industry, many cardholders -- regardless of class, education or income -- can only win by not playing the credit card game.

· On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online athttp://www.npr.org.

· By mail: Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.

· By e-mail:singletarym@washpost.com.

Comments and questions are welcome, but because of the volume of mail, personal responses are not always possible. Please note that comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.