Government is saving the credit card industry from itself.

Has there ever been an industry so relentlessly at war with its customers as the credit card industry is now? Watching new credit card legislation sail through Congress this week is the industry's reward for giving even its most responsible customers the overwhelming sense that they are getting ripped off. Indeed they are, and there is no more compelling, incontrovertible proof than the flimflammery of "over the limit" charges.

Last week, in a town-hall-style anti-credit card rally, President Obama shared his stage with a woman who had accidentally charged a payment to the wrong credit card, which let the payment go through, then turned around and said she was "over the limit" and raised her rate to 30 percent. This neatly encapsulates the worst practices of the credit card industry. Credit card companies can easily just turn down a charge that put a card over its maximum. No harm, no foul.

Instead they happily let their customers go over their limit (raising the question of why it's called a "limit" in the first place), then say that those customers are in default on their agreements and raise their rates. Pulling out the wrong card to pay for light bulbs at the hardware store turns into a mistake that results in hundreds of dollars of extra interest charges. The credit card companies claim, amazingly, that they do this to spare their customers the embarrassment of having the card turned down.

Over-the-limit rate hikes are the most indefensible example of rate changes—for being late on a payment, for having a lower credit score, or for no reason at all—that give credit card holders the sense that they have fallen into a Queen of Hearts world where the price of credit is whatever the banks say it is. For credit card issuers this is a customer relations disaster. But even setting aside the obvious problem of having customers who hate you, it is also terrible business.

Preventing card issuers from arbitrarily ratcheting up rates—as the legislation now on the table does—isn't just a way of protecting consumers. It is also, just as importantly, a way of saving the banks from themselves.

The most telling example of just how shortsighted the worst practices of the credit card industry really are is a company called Advanta (ADVNB), the country's 11^th-biggest credit card issuer. A walk through a site such as Ripoff Report will yield several bushels of stories of customers who saw Advanta raise their rates, often to 34.99 percent, for the flimsiest of reasons or no reason at all. Among credit card issuers, Advanta stands out for the number and rancor of the complaints.