Banks and credit card issuers have been raising credit card interest rates before the new credit card rules take effect next year drawing the ire of law makers.

The Senate Banking Committee chairman, Christopher Dodd, D-CT, is pushing legislation that would freeze credit card interest rates on existing credit card balances until the law takes effect.

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According to the Federal Reserve, the average credit card interest rate in the third quarter of 2009 is 13.71 percent. Credit card interest rates have been steadily climbing since the third quarter of 2008 when it stood at 11.94 percent. The fourth quarter of 2008 saw average rates rise to 12.03 percent. The first quarter of 2009 rates were at 12.97 percent and in the second quarter of 2009 rates rose to 13.31 percent.

Banks and credit card issuers have also been raising credit card fees and lowering credit card limits to better manage their risk. They are paying for their lax lending standards in the recent past.

The Federal Reserve reported that 9.55 percent of credit card loans have been written off by banks as bad debt, meaning they don’t expect to recover that money. The charge off rate for all banks in the first quarter of 2006 was only 3.14 percent. During the last recession, the high point for charge off rate was only 7.85 percent.

Even though credit card interest rates and credit card fees are headed higher, the total  outstanding credit card debt has been declining for the past four quarters. Revolving credit decreased 10 percent in the third quarter of 2009. Total revolving credit in the third quarter is $889 billion, down from $975 billion in the third quarter of 2008.

Getting out from under a mountain of credit card debt isn’t an easy thing to do. Many people are able to consolidate credit card debt and eliminate credit card debt by putting together a financial plan.

You can do the same by putting together a realistic financial plan that tracks your monthly income and expenses.

Consolidating and eliminating credit card debt will be a long, hard process but it is possible with a little discipline and a plan. In the recent past you could refinance your mortgage to pay off credit card debt, but for most people that isn’t an option anymore. Which actually is a good thing, because you’re not eliminating your debt by refinancing your home, you’re just shifting the debt.

To start the process, come up with a monthly budget that takes into account all of your spending. Track every single purchase for a month - even the little incidentals like that daily cup of coffee at Starbucks. You will be surprised to see how much these little purchases add up.

When you have put together a list of your monthly spending habits, see what can be eliminated without too much pain. The idea is to create a budget that you can live with that isn’t too hard on yourself.  If you cut too much spending, you won’t keep to the budget and you’ll be back where you started. You can always decide to cut more later if you find the cuts you have already made aren’t painful.

The money you have cut from spending should be applied towards your highest rate credit card. In fact, only pay the monthly minimum on the lower rate credit cards. Once you have paid off the highest rate credit card, start with the next highest rate card. You can use a credit card payoff calculator to see the savings benefit.

Other options beside cutting expenses to pay off credit card debt is to consolidate debt into a bank loan. Bank loan rates are lower than most credit card rates. Also, by consolidating debt into one loan with a lower interest rate, your monthly payments will be lower. The money you save with a lower monthly payment can be applied towards the loan or put into an emergency savings account. Having six months of expenses saved can tide you over in case of a job loss in the family.

Getting a student credit card is going to be harder starting in February 2010 thanks to the credit card reform bill that was passed this summer.

The new legislation prohibits credit card issuers or banks from issuing credit cards to anyone under 21 unless they have an adult co-signer or proof that they can cover the monthly credit card payments.

The changes are actually a good thing for young adults who probably haven’t yet learned how to manage credit wisely.

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Sallie Mae, the company that provides federal and private student loans for undergraduate and graduate students, did a study that found 84% of undergraduates have one credit card and 50% carry four or more credit cards. Young adults graduating with credit card debt with exhorbitant interest rates are creating a financial burden for themselves.

Now that you will probably be co-signing a credit card application with your child and you’ll be on the hook financially, you should make sure your child understands how to use credit to their advantage and not to their detriment.

A good place to start is to educate your child about credit first. The following are some tips on building credit.

Credit is a good thing when used properly and teaching your child how to use credit properly will benefit him or her for the rest of their life. Helping them build a credit history early on will raise their credit score and lower the rates they will be offered in the future, enabling them to get a lower mortgage rate when buying their first home.

Balance transfer credit card offers used to have a zero percent promotional interest rate for a year. Since the credit crunch and the recession that started late last year most credit card balance transfer offers now only have an introductory interest rate for six months. More often than not, the intoductory interest rate isn’t zero percent anymore.

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Another change these days in balance transfer offers is the balance transfer fee the credit card company will charge you for the transfer. The maximum transfer fee charge used to be a fix dollar amount, usually around $50 to $75 dollars depending on the credit car issuer.

A few years ago the charge was changed to a percentage of the total dollar amount of the balance transfer, usually three percent.  Then the average fee was raised to four percent. Now some banks have raised the fee to five percent of the total balance transfer amount.

When you factor in the fee you are paying for the balance transfer the promo interest rate you are paying isn’t so attractive anymore. A five percent fee on a $15,000 balance transfer will come to $750. The zero percent offer is looking less like zero percent when you consider the transfer fee.

If you are thinking of taking advantage of a zero percent balance transfer offer from your credit card company be sure to read the fine print on the balance transfer fee, do the math and make sure the transaction is worth it.

Prepaid credit cards and debit cards have become more and more popular these days since the credit crisis of last year. Credit card issuers and banks have raised the bar when approving credit cards for borrowers.

Gone are the days of easy credit like getting multiple credit cards from the same bank or getting a mortgage without proving your income.

Credit card companies are also lowering credit card limits for even their best credit card customers. The Credit Card Holders Bill of Rights has also changed the credit card business. New rules include giving a credit card holder 45 days advance notice when any major changes to their account is made, like raising the credit card limit. The new rules don’t include notifying a holder when their credit limit is lowered.

As a result of more restrictive credit, consumers have been turning to prepaid credit cards and debit cards to make purchases. A pre-paid credit card allows one to enjoy all the benefits of having a credit card without the risks. You can only spend what you have on your prepaid card limit.

Prepaid cards also allow you to build your credit history and credit score. Other features include direct deposits to a prepaid card, replenishing your balance. Best of all if you have less than perfect credit or even a bad credit history, you will more than likely be approved for a prepaid card.

Debit cards are another alternative to traditional credit cards. With a debit card, your purchases are withdrawn from your checking account. Although with a debit card you might not have all of the benefits of a traditional credit card, including being covered for auto insurance when renting a car.

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