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New rules, technology reshaping credit cards

A new breed of credit cards is on the way for 2011.

Tighter regulations, cutting-edge technologies and a growing willingness by banks to lend again are just some of the factors reshaping the credit card industry. For sharp-eyed consumers, the changes could present an opportunity to significantly lower monthly expenses.

To make the most of your plastic, here are the key trends to watch.

*Cards come knocking. After clamping down on accepting new customers during the recession, credit card offers are cluttering mailboxes again. Mailings almost doubled to 2.7 billion last year, according to market researcher Synovate. That's after solicitations hit their lowest volume in more than 16 years in 2009.

And the offers are expected to continue piling up, particularly for anyone with a strong credit history.

The courtship of prime customers comes as those with less-than-stellar payment records lose their luster for card issuers. The shift is the result of several new regulations that limit how much card issuers can profit off less reliable customers.

To start, late fees are now generally capped at $25. Card issuers can no longer hike interest rates without warning. And monthly statements now spell out the cost of carrying a balance, which is intended to motivate customers to pay down debt more promptly rather than rack up interest charges.

On the other hand, wealthier customers remain very profitable for card issuers. That's because they pose little risk and tend to spend more. And banks collect fees from merchants every time customers swipe their cards.

So even as banks and credit unions start soliciting new customers again, they're not about to rubber-stamp approvals for just anyone. The focus will be on big spenders with good credit.

*Incentives to switch. Balance-transfer offers are getting more generous.

The idea behind such offers is that customers can lower their interest expenses; card holders are typically given a 0 percent rate for an introductory period as a reward for switching allegiances.

In the downturn, those periods were cut in half to about six months and sometimes even to as little as three months. But now issuers are expanding introductory periods to about a year again. Select premium Citi cards even offer periods of up to nearly two years.

The fees on balance transfers, which had gone up to 5 percent in many cases in the downturn, are now back down to about 3 percent, according to LowCards.com, which tracks credit card offers.

There are other little perks being offered as well. For example, American Express and Citi are courting those who travel often by getting rid of fees on purchases made abroad using certain cards.

*Going high tech. Banks and credit unions are continuing to expand their mobile banking options. In 2011, expect them to get high-tech with credit cards, too.

Bank of America, for example, started testing contactless credit card payments in New York City last month. The test involved a chip that is inserted into a customer's smart phone, which then lets the customer make payments by waving the phone over a scanner. The bank said it's reviewing the results of the trial and plans to roll it out nationwide later this year.

A similar service is already available to most Citi credit card holders, who can have a PayPass chip embedded in their cards or smart phones. A tap of the card or phone can then be used to pay at about 230,000 merchants.

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