THE NEW BEST CREDIT CARD

After years of shrinking credit limits, rising rates and new fees, not to mention government legislation, credit card users have every reason to question the value of the plastic in their wallets. And now that the dust has settled, many may find their current credit cards aren't as good as they could be.

What cards will and won't do for customers today is significantly different than it was even a year or two ago. The new legislation, for example, which applies to existing and new accounts, prohibits issuers from raising interest rates on an existing balance in good standing, requires them to put payments of more than the minimum toward the highest-rate balance first, puts a cap on penalty fees and limits credit availability to young adults. "We've seen significant changes since the CARD Act went into play," says Ruth Susswein, deputy director of national priorities for Consumer Action, an advocacy group. Credit card debts have declined, and consumers are more aware of the cost of carrying a balance, she says.

At the same time, many card companies have raised interest rates to counter the revenue-squeezing effects of the new rules. The average cash-back card now carries an interest rate of 16.62%, up from 13.83% in April 2009. For someone making a typical minimum payment on a $3,500 balance, that's the difference of more than $400 in interest over the life of the loan. And interest rates have continued to rise, despite no increase in the prime rate. "They're opportunistic rate increases," says Susswein. Card issuers have also played with other, unregulated charges, such as adding annual fees and increasing those for cash advances and balance transfers.

At least consumers once again have plenty of choices another stark change from the days of frozen credit and routine denials. Banks expect to send out 3.2 billion card offers this year, up 15% from 2010, and more than double the 1.4 billion mailed out in 2009. "Issuers are actually sending the best offers we've ever seen in 20-plus years," says Anuj Shahani, the director of competitive tracking services for Synovate Mail Monitor. As an aftereffect of the CARD Act, the attractive terms you see in pre-approved offers are also more likely to be those you get, according to a study by the Center for Responsible Lending.

Still, finding a card that offers the best of the recent changes without the costs isn't easy. Many of the drawbacks are buried in the fine print (yes, there's still lots of that). SmartMoney and a team of experts dug through the cards to find the best new ones that might be worth a place in your wallet.