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Canada's credit-card industry would be required to improve disclosure to consumers and change some business practices under new regulations introduced yesterday by the federal government. But how exactly would the changes affect consumers once they come into force?

Would the new rules impose restrictions on credit-card interest rates?

No. Although consumer advocates and some federal politicians have lobbied for restrictions on interest rates, which can exceed 20 per cent, the government has decided not to wade into the territory of introducing cap rates. Finance Minister Jim Flaherty said there are numerous credit cards on the market that offer low interest rates, which means consumers have the advantage of being able to shop around and choose what works for them.

If interest rates won't be capped, how might the new rules protect me?

While the government doesn't plan to outlaw high interest rates on credit cards, the new rules would stop companies from jacking up rates without the consumer's knowledge. Card companies will have to inform consumers of rate changes on their monthly statements in order to help them plan for increases. That means a consumer who applied for a card with a low introductory rate for six months would receive notice before the increase takes effect.

Under the new rules, when can credit-card companies charge interest on new purchases?

Consumers would have at least a 21-day grace period on new purchases charged to their credit cards. Currently, financial institutions set their own grace periods, which can range from 15 to 24 days, according to the Department of Finance. But some card companies charge interest immediately on new purchases if a consumer is carrying a balance from the previous month. That would change: Consumers would only pay interest on balances carried over from the previous month – any new purchases would be interest-free for at least 21 days.

Mr. Flaherty said credit-card companies can't arbitrarily raise credit limits. Does this mean I won't be able to access higher amounts of credit?

No. Under the new rules, financial institutions would be prohibited from raising a consumer's credit limit without their express consent. The move is designed to give consumers the option of choosing to keep their credit limit at its current level. A bank would have to call a cardholder or include a notice in his or her monthly statement to seek consent before it could raise the individual's credit limit. Consumers will still be able to request a credit-limit increase or decrease from their bank.

The Finance Minister said banks will have to improve their disclosure practices. What does this mean exactly?

Credit-card applications and contracts will have to include a “summary box” that spells out, in clear terms, important information about rates and fees. In addition, financial institutions will have to tell consumers how long it will take to pay off their credit-card balance if they only make the minimum payment every month. For instance, someone with a $1,000 credit-card balance at an 18-per-cent interest rate might not realize it will take 10 years to pay off the debt if he only makes the minimum payment. Under the new terms, that information would have to be presented to consumers.

I have incurred fees in the past by going over my credit-card balance because of holds placed on my account by gas stations. Will this change under the new rules?

Yes. Under the new rules, consumers will be protected from fees charged for going over their credit limit if it's due to a hold placed on their account by merchants.

I use my credit card for transfers and cash advances. Would the new rules affect those aspects of credit-card use?

Under the new system, payments a consumer makes in excess of the minimum required amount must be allocated in a way that is beneficial to him or her. That means the payment could be entirely allocated to the balance with the highest interest rate, or be distributed proportionately between various balances. Currently, some card companies may only allocate the payment to the balance with the lowest interest rate.

Do the new rules talk about what happens if I'm late on my credit-card payments?

The federal government would introduce rules to stop financial institutions from certain collection practices, such as calling cardholders after 9 p.m. on weekdays or Saturdays, and after 5 p.m. on Sundays.

What else is the federal government planning to do to help ensure consumers are protected from certain practices by the financial industry?

Mr. Flaherty said the government has assembled a national task force to develop a public financial literacy strategy.

When would these new rules come into effect?

The new regulations will come into effect after they are published by the federal government this weekend and are subject to a consultation period.