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Advice for Credit-Card Users: Brace Yourself

date 02-12-2009 02:31 PM
author Anthony_Catalano writes:

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Back in December, to great fanfare, regulators approved a set of new regulations for the credit-card industry. Key provisions intended to offer American consumers much-needed relief include mandates for truly fixed interest rates, rational allocation of payments and better subprime card terms.

But buried beneath the optimism with which the rules were greeted lay an inconvenient truth: The new rules will not take effect until 2010.

Over the past two months, evidence is mounting both anecdotally and via media reports that nearly all of the major card issuers are ramping up efforts to squeeze more money out of us while they still can. Here's a quick look at what has been going on in the credit-card industry—and some steps you can take to guard against taking a hit.

Attacking from Every Angle
As Ron Lieber's appropriately titled article in the New York Times suggests, credit-card companies are in fact going to war against losses. And as the saying goes, "all is fair in love and war." Among the strategies card issuers are using are these tactics you certainly will not love: raising rates, lowering credit limits, imposing new fees… and for good measure, closing accounts altogether.

If you hold several card accounts, chances are that you'll be hit by at least one of these changes in the coming months (if you haven't been already). Trust me on this one, as someone who recently received a letter informing me that one card account I haven't used in years would be closed unless I started using it—and soon.

Membership Has No Privileges
Although threatening account closure simply because a card hasn't been used in a while might seem rather capricious, at least it's understandable. But what American Express reportedly has been doing— closing users' accounts simply because they shop at certain stores or work in industries that might soon face economic pressure… now that feels downright creepy.

The company claims it didn't actually use these criteria in assessing accounts (its letters to affected cardholders clearly stated otherwise) and that it doesn't plan to judge your creditworthiness this way going forward either. But you still might want to check out this New York Times piece before using your card to pay for marriage-counseling sessions or a night out at the local pool hall… if your platinum AmEx is that important to you.

A Swift Kick to the...
Subprime cards typically are seen as the red-headed stepchild of the credit-card industry. Similar accounts in the mortgage industry are seen as the catalyst for the housing-market crash and subsequent domino effect being felt today throughout the economy.

But so-called private-label cards, which occupy the middle rung on the credit-card ladder between subprime accounts and accounts serviced by industry giants like Visa and MasterCard, are the ones hurting most right now.

What does this mean for you? It could be much more difficult than it has been in the past to get approved for in-house financing on big-ticket purchases like a TV at Best Buy or appliances at Sears.

Your Only True Recourse
The other inconvenient truth surrounding all of this news out of the credit-card industry is that there isn't much you can do to stay ahead of the curve. Resources like CardHub.com can help you compare credit-card offers and find the card that best suits your needs. And The Wall Street Journal partners with FiLife.com on a nice little How-To Guide.

But the only way to avoid these concerns completely is to live within your means and stay out of debt in the first place. That obviously is far easier said than done. But M.P. Dunleavy of the New York Times offers a little inspiration with a look at how she and her husband changed their spendthrift ways.

Whether your future holds an existence as a new, debt-free you… or continued struggles to stay abreast of the latest credit-card pitfalls, Dunleavy's simple advice hits the mark. And I can't say it any better than she does: Brace yourself.

Has a credit-card issuer raised your interest rate or closed a dormant account recently? What are you doing to combat debt in these tough economic times? Sound off here.

Message Edited by Anthony_Catalano on 02-12-2009 02:47 PM

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Re: Advice for Credit-Card Users: Brace Yourself

comment number 10
date 02-18-2009 03:08 PM
author Dani73 writes:

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A year ago I went through a traumatic divorce & custody battle. My ex left me with nothing including my credit being ruined on two major credit cards. When I requested help from the credit card companies I was referred to credit counsel agencies. They offered absolutely nothing ,because one, I was not in enough debt (about 20,000) and two, my payment would be raised to over $500 a month. Well, Americans, if we could pay the minimum payments then why would we need to consolidate to a HIGHER payment!?! My point is this, as a single parent this was the last thing I needed to hear. Oh and for thirty years I have had excellent credit, including houses, cars, loans, credit cards, etc. Never ever late or defaulted on any of it! JP Morgan is one of the cards I had to walk away from (the other Discover). This Visa I have had for almost ten years, it has been bought out four times!!! Never mind that I had excellent credit, prior. JP just bought one of the banks that I still have a credit card with and have been paying before the due date & always more than the minimum. Just recently I was notified by mail that my 8.5% rate was now raised to 19.99%!!! I spoke to three different individuals (supervisor too) and there is no REAL explanation, since I have never been late, etc. I received a letter from one of there overpaid pompous VP's too. My attorney advised me to walk away in the first place, since I was to receive no help. This was very diffiicult, since I had such a HIGH excellent credit rating!! BIG DEAL!!! I still owe about $2,000 and when my income tax comes that will be completely paid off. They can keep their stupid high rate!! These credit card companys are begging to be bailed out by the government. I used to be a loan officer and looked at credit reports everyday and helped people have alternatives. I always had empathy,you never know when it can happen to you. Americans, we are going to be penalized even if are credit isn't ruined by some unfortunate event (I also lost my job just six monthes ago due to the economy, our company downsized) because as taxpayers WE are going to pay for all these debts anyway!!!!! Before using that card, do you really want to give the company the satisfaction of making all that interest!?! In my case, it was different. I know there are others going through it too. It's like do my kids eat or do I pay my high interest credit card, who doesn't care anyway and gives us no other choices either. Credit Cards and Insurance companies rule this country! By the way I no longer have any medical insurance either, the premiums are inhumane!!! Think about it!!!

Message Edited by Dani73 on 02-18-2009 03:12 PM

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Re: Advice for Credit-Card Users: Brace Yourself

comment number 11
date 02-18-2009 07:18 PM
author Aussie2361 writes:

body They are making money on both sides of the fence. Is there any mention of merchant fee reform? The general public does not know that the places which they use their credit/debit cards also pay what amounts to a 3%-5% merchant fee to Visa/Mastercard. My business has seen a steady increase of card use vs. cash over the years. 80% card to 20% cash. I pay Visa/Mastercard over $3000 per month for accepting their credit cards.

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Re: Advice for Credit-Card Users: Brace Yourself

comment number 12
date 02-18-2009 07:49 PM
author IIBOBBYBOY writes:

body I KNOW I SPEAK FOR THOUSANDS, WHEN I SAY WHAT GOES AROUND , COMES AROUND, SINCE THOSE WHO STRUGGLE AND BARLEY MAKE IT, WILL MEAN THEY NO LONGER CAN MAKE IT, MORAL TO THE STORY , JUST WRITE THEM OFF. ITS WORTH IT TO YOUR INSANITY, THEY SHOULD BE LOWERING, NOT INCREASING IN THESE HARD TIME, THEY DON'T GIVE A RATS --- ABOUT YOU, SO DO WHAT YOU HAVE TOO. THIS IS CALLE "MADE IN AMERICA"

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Re: Advice for Credit-Card Users: Brace Yourself

comment number 13
date 02-18-2009 09:23 PM
author frankunderwood writes:

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I received my statement from Chase, and was horrified. My minimum payment had almost tripled. I called the company, and was told that in order to help customers get out of debt faster they had raised the minimum payment from 2% to 5%. I had a fixed rate of 3.99%, until my balanced was paid in full. I was advised that if I wished to keep this lower rate I had to pay a $10 monthly fee and a minimum payment of 5%. The alternative was to increase my rate to 7.99% and only pay a 2% monthly payment. I was also told that my rate would be fixed, just as my last agreement had been. I received the conformation letter only to discover that my new higher rate was only good for 2 years, unlike my original agreement of the unlimited term. I was also told that Chase reserved the right to change the terms of their agreements at any time, and they could not guarantee me that this wouldn’t happen again. I’m so thrilled that Chase was thoughtful enough to help me get out of debt faster. Can you say extortion!

P.S I just checked my bank statement, and guess what, THEY TOOK OUT THE 5% PAYMENT ANYWAY!

Message Edited by frankunderwood on 02-18-2009 09:31 PM

Message Edited by frankunderwood on 02-18-2009 09:52 PM

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Re: Advice for Credit-Card Users: Brace Yourself

comment number 14
date 02-18-2009 09:54 PM
author steve7980 writes:

body I recieved a letter in the mail that they were raising my rate from 7.99% to 20.99%. I have a very good credit rating 7.80.So I called fia card services(Regions bank card).The operator told me it was something on my credit report.So I pulled my report from all 3 companies. It showed no such request on my report. She said it was a soft hit.Their is no such thing as a soft hit .Any request for your report will show up.So i was put on hold for the 4th time.She said her supervisor said they would leave the rate as it was.

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Re: Advice for Credit-Card Users: Brace Yourself

comment number 15
date 02-18-2009 10:13 PM
author rini330 writes:

body BANK OF AMERICA his me hard. they not only cancelled my account. of which i have never missed a payment nor been late. but, the charges on the card are all medical related. had no choice in medical emergency and when i lost my job, i contacted them to find out if i qualified for their hardship program. they said and i quote " if you had a job in which you could ensure payment then you most certainly would have qualified for this program, but because oyu are currently unemployed we can not approve you for this program, nor can we lower your finance fees or minimum due. if however in 2 months time you do not pay the minimum due you will be contacted for collection. thank you for using bank of america." first of all how much sense does i tmake to be denied for a hardship program because i lost my job. and that i would only be approved for it if i had a job. basically they have no hardship program. and now, they have tripled my monthly finance fees, and call me 3 to 4 times a day. i have had to get a lawyer involved, and yet they just keep calling and calling. i pay what i can each month. it's either pay the rent for a roof over head or pay the credit card and be out on the streets. they do not care about their customers. and after their huge bailout they cannot even account for where they spent the money. but had no problem giving out huge bonuses and sending execs on expensive trips. the bailout money should have been given to the american people. pay off all those debts and the economy would get rolling again. if they had given each citizen a share of that bail out money, it would not have been as expensive as bailing out those banks. help the american people to become debt free, and our economy wuold start rolling in the right direction again!!

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Re: Advice for Credit-Card Users: Brace Yourself

comment number 16
date 02-23-2009 08:32 PM
author jazz806 writes:

body I got three letters in the mail today. 2 from Chase and one from Citibank....Circuit City Chase card credit limit being reduced....have no balance on this card and have never used it. Chase Visa credit limit being reduced to less than my current balance. HAVE NEVER MISSED A PAYMENT OR EVER BEEN LATE. Citibank cutting credit limit also to less than what I owe. Have been a customer for 21 years and have NEVER been late. So now I have two cards that are over the credit limit???? I have EXCELLENT Credit. Not anymore, simply because they reduced my credit limits. Apparently, I was the dope always making my payments on time. Citi and Chase have mismanaged themselves and they get government bailout money. I make my payments and maintain good credit standing and what did I get? I got screwed. We are all getting screwed. I will pay these off and close all of my accounts. Keeping my money in my mattress.

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Re: Advice for Credit-Card Users: Brace Yourself

comment number 17
date 02-24-2009 10:46 AM
author It-Never-Ends writes:

body Just for the record: Did anyone really believe that the banks would ever do anything for the consumer? They used the first bailout money to buy more banks and actually increase their debt! This was actually a very wise and crooked move. By buying up bad loans they qualified for even more bailout cash and with the gov't talking about "nationalizing Citi" there isno where to run. I was told last week that since the prime rate was down to .25% I would have to pay an increase up to 29.99% and if I ever made a late payment that will go to 31.99% but I have an option. If I do not like it just pay off what I had charged by March 1, 2009 and cancel the account! Now that is a friendly banker talking, right? When I see investment houses rushing to become bankers it tells me all I need to know about the scams that we will have to put up with this year. In 2010 if you still have a job, a home and a credit line then you may just benefit from the newest regulations, but remember what Congress gives it can also take away. I would not be surprised to see all the positive changes removed by newer regulations. I lost so much in my Fidelity 401K that I am too broke to even attempt to close it out. I have to keep it and pray to God that within 15 years the stock market will turn around and just go back to where it was in Nov of 2007. That 14,000 points should have told me that something was wrong, we were aware of the overpriced housing markets but I had no idea that everyone was automatically approved for these wacko loans. My neice, an unwed mom, with less than 6 months of full time employment was able to purchase a new home! She went into fiscal problems within 6 months and began the late payments etc. but with the value of her home falling 25% in a year the bank was willing to allow her to stay there. Now I refused to allow my daughter to buy a home without a solid income that would guarantee her ability to repay the loan. She now refers to me as "the fool" and I was. Being concerned with fiscal responsibility was a mistake these last few years. I lived my life under the apparently false assumption that doing the right thing would lead to rewards. My daughter has nothing and we are paying for my neice's $400,000 home - oh wait today that home will list for $275,000 but try to find a buyer. Sorry I ramble on every so often. Credit cards are the new loan sharks of the world. Remember when bad credit forced people to the local money lender at his high interest rates? Well the country solved that problem, we just legalized the action. What would you have said even 5 years ago if I told you that a credit card could and would charge up to 50% interest? Like everyone else you would not have believed it possible. Well think again my friend. We have entered a new age and so help me I do not know where or when it became possible for these things to happen. No one was minding the store. Hell, they were all looting it. When Congress votes itself pay increases that exceed the cost of living adjustment that all other workers are being forced to accept it sickens me. What have they done to deserve even the salary they were getting? Now I blame the voters for keeping these irresponsible people of both parties in office. We do have term limits, it is called an election and when we are forced to live under these conditions then vote the bums out. Yes we will most likely get a new bum, but someday we just may get a decent person who is actually trying to help. I resent it when I hear these people say they entered politics to pay back, to do good and for public service! What public service is done when each year the dollar is buying less and then taxes go up and the past is beginning to look like heaven on earth, which we all know it wasn't. I really did not think a depression was possible after the SEC and all these economic professors advising Congress, the President and bankers. We just keep forgetting the greed factor. They never have enough do they? Well I apoligize for running on, but you know what, this is the only free thing I can do --- complain even if it solves nothing I feel a little better when I get this latest angst out of my mind. Sorry to have ruined your day. Good luck and God Bless.

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Re: Advice for Credit-Card Users: Brace Yourself

comment number 18
date 02-24-2009 11:47 AM
author AngelGirl52 writes:

body This is not President Obama - BUT I SURE CAN TELL YA HOW TO FIX THE ECONOMY. What needs to be done with the stimulus dollars or bailout dollars (whatever you want to call it) is - it needs to be divided among every U.S. Citizen 18 and over - this works out to be about $297000. It's actually more than $297000. this amount is after taxes. So, First, tax money goes back to the Federal Government. NOW What do you think the American PEOPLE would do with $297000. each. I think we could do a pretty good job of stimulating the economy. Like paying off our homes or purchasing a home. What would that do for the banks? Or being able to put our children thru college. How about buying a new car, this would put auto workers back to work. Bailing out large corporations is only a temporay fix - if a fix at all. Give it to the hard working people trying to survive people and see how well the economy gets stimulated. This is the solution - I hope someone knows how to spread this around - because IT CAN WORK

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Re: Advice for Credit-Card Users: Brace Yourself

comment number 19
date 02-24-2009 12:28 PM
author dannyboy24 writes:

body Well said Angelrick4 ! Paying cash will send a message! Shopping in stores that stock the largest variety of American made products will also send a message!

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