Tricks of the credit-card trade.(Editorial)

Credit-card companies have been hard at work stuffing your mailbox with credit-card offers flashing what may look like terrific rates and deals. They've also been hard at work lobbying Congress and have succeeded in getting harsh new bankruptcy legislation passed by both houses. While proponents say the proposed legislation is aimed at those who abuse the current system, it will also harm many hard-working consumers. Increased paperwork and stricter eligibility requirements will make it more difficult for people trapped in debt--often because of illness, divorce, or job loss--to get a clean start. (See our report on page 20.)

In effect, the legislation protects the credit-card industry from the effects of its own marketing and lending practices, which have been catching many consumers unaware and unprepared. For example, a card offer may lure consumers with the promise of low interest rates. Later, those rates can be raised for one of many reasons, from a late payment on that card to delinquent debts that appear on a consumer's credit report. And as we reported in May, many card companies are simultaneously increasing their late fees and reducing "grace periods." The Wall Street Journal reported that some banks have retroactively changed certain terms of the agreements for their credit cards. Those changes effectively take away the cardholder's right to sue.

To get more cards in circulation, companies are aggressively marketing their products, even targeting consumers with little or no income, such as college students. Card companies have much lower income-eligibility standards for students than for other potential customers. The result: Three out of four college students have at least one credit card, according to a survey by student-loan agency Nellie Mae. The study found that the average balance on cards carried by the typical undergraduate student totaled $2,748.

We ...