Personal Finance: You can fight credit card changes

Personal Finance: You can fight credit card changes
By Claudia Buck

http://www.sacbee.com/business/story/1605944.html

Published: Sunday, Feb. 8, 2009 - 12:00 am | Page 1D

Pull out the plastic and you may get your hand slapped.

That's how a lot of consumers are feeling these days as credit card
companies clamp down.

From American Express to Washington Mutual, card companies are getting
tougher on terms: Credit lines are being yanked. Minimum payment
amounts have jumped. Interest rates are doubling. Card transactions
are being declined.

And consumers are fuming. Especially those who say they've never been
late or missed a payment.

Last month, retired Sacramento city employee Terry Moreno of
Greenhaven got a double whammy on her Chase credit card: The minimum
payment more than doubled to $486 and a new $10 monthly charge was
tacked on. Donald Divelbiss, a retired McClellan aircraft mechanic,
said his Washington Mutual credit card interest rate is tripling,
going from 9.9 percent to 29.9 percent.

Sacramentan Karen Nordyke's credit limit on her Wal-Mart/Sam's Club
card was cut by half to $150.

"I've never been late. I've never had a problem and all of a sudden,
my credit line is down to $150," said Nordyke. "How can you get good
credit when they keep dropping your limit?"

It's a familiar refrain from consumers here and across the country.
And like everything these days, it's all about the economy.

Credit card companies are getting hammered by the same financial
pressures affecting their customers. Faced with rising rates of
delinquencies and defaults, they're trying to cover their losses.
Meanwhile, cash-strapped consumers and small businesses – battered by
job losses, layoffs and rising costs – are tapping their credit cards
for even basic spending.

Delinquencies on U.S. credit cards rose to record highs in January,
according to a Fitch Ratings survey released last week. It said
payments more than 60 days late rose to 3.75 percent, beating the
previous record set in 1997.

"Card issuers have consumers on a much shorter leash because of the
economy," said Greg McBride, a financial analyst with Bankrate.com. To
protect themselves against mounting delinquencies, he said, credit
card issuers are cutting limits, raising rates and increasing minimum
payments.

The bad news: It's perfectly legal.

The good news: Under rules adopted in mid-December by the Federal
Reserve, banks will no longer be able to raise credit card rates
without good reason and must give you more warning – and in type
that's more prominent and visible on your billing statement.

The not-so-good news: Those changes won't take effect until July 1,
2010. (For details, see "Credit Card Relief.")

Beth Mills of the California Bankers Association said banks nationwide
are working to get those changes in place, while still "managing their
credit risk" in the shaky economy.

Meanwhile, some smaller financial institutions, like Sacramento-based
Safe Credit Union, are trying to find a balance when it comes to
handling consumer debt.

Sharon Whiteley, Safe senior vice president, said the credit union
recently reviewed all of its Visa credit cardholders and raised
interest rates where necessary, based on credit histories and
delinquencies. But it capped the increases at 4 percent and stopped
short of slashing credit lines.

"If we lowered lines of credit or closed them entirely, it could
negatively affect our members' credit scores," said Whiteley. "That's
something we don't want to do, especially in this economy."

To avoid further credit card pain, here are some tips from financial
experts:

• Complain – nicely. "If consumers feel their credit limits, for
instance, have been reduced unfairly, they should talk with their bank
or other credit-card issuer to see if there's a valid reason," said
Mills of the bankers association. "Find out why and see if that credit
line can be reinstated." The same goes for hikes in interest rates or
minimum payments.

Moreno, for instance, was able to reach a compromise with her card
issuer: She got her minimum payment restored to $197 but at a higher
interest rate.

• Shop around. For those with good credit scores, it's an ideal time
to find a better deal, said Bankrate.com's McBride. Use credit card
comparison calculators, like those at www.lowcards.com or www.bankrate.com.
The Federal Reserve also has a handy comparison checklist on its Web
site (www.federalreserve.gov).

And look at local banks or credit unions, which may offer lower credit
card rates.

• Consider transfers. Look into transferring your balance to a lower-
interest-rate card. But be wary of fees and low introductory rates
that can expire.

• Be cautious on closures. Lots of fed-up consumers want to close
their accounts. But experts warn it can backfire. You'll hurt your
credit score if you close older accounts that show long credit
history. With fewer cards, you'll likely increase your debt-to-
available-credit ratio.

If an account is closed, work hard to reduce the balances on other
cards to keep that credit ratio healthy. Otherwise, you could face
even more rate increases.

• Pay on time and more than the minimum. Both will help avoid fees and
whittle down your debt. Know the date your payment is due, especially
if you have more than one card.

• Avoid unnecessary fees. In addition to late payments, there are
extra charges for exceeding credit limits, cash advances, returned
payments, transferring balances or paying by phone.

• Watch for changes. Read your monthly bill and be aware: If you have
a card with a low introductory rate that's expiring, credit card
companies are not required to send a notice when your interest rate is
going up.

And while those 2010 credit card changes may sound like welcome
relief, there'll be a price, says Bankrate.com's McBride.

"It'll certainly level the playing field between consumers and
cardholders," he said. "But it'll make credit more expensive and
difficult to come by for consumers without much credit or impaired
credit."

They'll be stuck with high- er interest rates and smaller credit
lines, he added.

In the meantime, McBride advises: "Don't take this sitting down. If
you have credit card debt, it's time to focus on paying it down. … If
you've got good credit, be on the prowl for cards with better terms so
you can speed up debt repayment."
.

Relevant Pages

  • Re: Credit Card Hearings in Congress
    ... of consumers without giving a second thought to what it is doing in ... �Used their credit responsibly. ... It never ceases to amaze me that credit card lenders can suspect you ... or if you have missed payments ...
    (misc.consumers)
  • Re: Credit repair / dealing with old debt. Please help
    ... month I would be able to put $500 a month toward my debt. ... I today called my 4 old credit card companies and found out what ... before making any payments. ...
    (misc.legal)
  • Re: Screw Macys - OT Rant
    ... we were still trying to recover, and a few of our bill payments got sent in ... not a single late payment (and if credit histories would go back longer it ... be - hey, these are Macy's customers, not Wal-Mart customers). ... You would think that stores and credit card companies would be so worried ...
    (rec.pets.cats.anecdotes)
  • Wheres all that rightwing dumbass loon glee over "Black Friday?????"
    ... after retailers reported a modest bump in sales because ... Retailers Report a Crisis in All Aisles ... November Sales Slump as Shoppers Stow Credit Cards ... Credit card charges enjoyed annual double-digit growth from 2004 to ...
    (alt.politics)
  • Re: Cuba shafting VISA users with surcharge
    ... the cuban peso to Canadian, and then compare it to what's on your credit ... they can't put a Cuban peso charge on a credit card (since there is no peso ... they decided to hit credit card transactions as well. ...
    (rec.travel.caribbean)
Loading