Credit Card Blog

According to a report on WBALTV in Baltimore, Maryland, “Maryland could become the first state in the nation to make it illegal for credit card companies to retroactively jack up rates.The measure has already passed the House and is in the hands of the Senate Finance Committee.”

As it currently stands, and as many people are well aware based on first-hand experience – credit card companies can change the interest rate on your accounts for any reason, at any time.  Maybe it happens as a result of the Universal Default – if you’re late on one payment and the credit card company finds out, they raise your rate.  Often, it happens just because – since they are not prevented from changing the rates, a credit card company can change your terms whenever they feel it necessary whether you’ve made a late payment or not.

Delegate William Frick, D-Montgomery County, is heading up the bill that will make it illegal for credit card companies to retroactively change their interest rates.  The agreement that the card companies enter into with the consumer states what the interest rates are – and they will have to stick to those terms.  It doesn’t mean the rate couldn’t be increased for NEW PURCHASES made on that card; but it will at least prevent card companies from increasing the interest rate and applying it to the outstanding balance on the card already.

This is part of the federal regulations for all credit cards that will go into effect in July of 2010, but Frick hopes to get the bill passed for preventing retroactive credit card rate increases within Maryland much sooner to give consumers some much needed credit card relief.

Are you among the millions of Americans experiencing reduced credit limits, higher interest rate or due date changes on your credit cards?  While the practices are (currently) legal, there are a few things you might want to do if these changes are making it difficult for you to repay your debts:

Call The Credit Card Company: If your credit limit was reduced, call and find out what the reason for the change is.  Chances are they’ll tell you a “review of your credit report prompted the change”,  but a phone call may help you get the credit line re-instated.  At the very least, if the credit limit was reduced BELOW what you’ve already spent on the card (and therefore resulted in an over-the-limit fee), demand that the fee be taken off the card for the over-the-limit charge. You didn’t spend over the limit, the credit card company changed the limit after the money was already spent and you should not have to pay for that charge.

Try to Compromise: If changes to your credit card result in higher minimum payments that make it impossible for you to pay for all of your monthly obligations, try to compromise with the lender.  If you can restore your minimum payment back to the amount you’re able to pay, they’ll probably do that for you in exchange for a higher interest rate.  Not ideal, but it would be worse to pay a late fee every single month if you can’t keep up with the payments with the higher minimum due.

Look for a New Card: If your credit card terms were changed and you have good credit, it’s time to look around for a new card.  While the lending has been tightened considerably, people with top notch credit can still get new credit cards.  Once you have a new card, transfer your balances and stop dealing with the company who changed your terms unfairly.

Don’t Start Closing All Your Accounts: It’s tempting to close your credit card accounts when you get angry with the practices of issuers!  Don’t go on a credit card closing spree though – it will result in a lower credit score.  You can pay your accounts off and not use them and help yourself more than closing the account because closing results in increasing the amount of debt to available credit ratio.

Keep a Close Watch: Review your credit card statements monthly and watch for any changes so you are aware what is happening.

In a report gathered by Symantec’s Security Technology and Response (STAR) organization, stolen credit card details and bank accounts  are among the most advertised goods in the ”underground” economy online.

This report reveals that the potential value of stolen goods advertised on the Web is estimated to be more than $276 million – and this is just between July 2007 to June 2008.

For some criminals,  stolen credit card numbers are purchased for as little as $0.10 to $25 per card!  Symantic reports the average stolen credit card limit advertised online is more than $4,000 though.  In addition to credit card numbers being sold in this underground economy, stolen bank account information sells for between $10 and $1,000 and the average advertised stolen bank account balance is nearly $40,000! 

As credit card companies fear an increase in consumers who are unable to pay back their credit cards, many have begun reducing credit card limits for cardholders they consider “risky”.  In many cases, this doesn’t mean that the cardholder has made their payments late – it is often the result of other factors.  Card issuers report reducing credit card limits for cardholders who are carrying high balances on several cards, because they are seen riskier than someone who has small balances on their credit cards.

 A reduced credit limit can be a shock, because you often don’t get notified of the reduction until after it’s been changed on your card.  With holiday shoppers using their cards for their gift purchases, you could find yourself embarassed by a declined card that you thought had room on the balance for more purchases.

If you want to find out before the bored cashier tells you your card is declined in the check out line, call your credit card customer service and ask what your available balance is.  Also verify that they have no plans of lowering it as you intend to use the card – at least that way you will know where you stand.

Think the mortgage crisis doesn’t affect you if you don’t have current problems with your home loan? Think again.

This year, you can expect the fallout from the mortgage crisis to affect your Christmas shopping if you typically use credit cards to handle those expenses.

Although credit card companies are closing accounts left and right, cutting credit lines and raising interest rates, it may not be enough. Even though credit card debt is only a fraction of the mortgage problem, major card issuers like J.P. Morgan, Chase & Co., Citigroup and others cannot afford more losses. With the unemployment rate heading towards 8%, lenders are fearful that they will not be repaid when extending credit.

According to the US Federal Reserve reports, 60% of American banks have tightened up their credit card standards since July. Even those continual credit card offers sent in the mail are falling to the lowest point in over three years. The Wall Street Journal reports that many credit card holders will see an interest increase by an average of three percentage points and the increase will affect millions of customers.

Lenders are also being extremely careful in opening new accounts to avoid the subprime crisis from beginning all over again. Thanks to tightening standards, especially in areas like California and Florida who were hardest hit by the housing crisis, residents in these states may feel the biggest fallout.

Equifax studied the payments made by several homeowning families between 2002 and 2005.  Of families who had one or two late mortgage payments between 2002 and 2004, 26% kept up with their credit card payments without any late payments and 59% kept their car payments up to date.  The trend of choosing to pay credit cards and cars before mortgage continued in 2005, with 38% of mortgage late-payers keeping up with credit-card payments, and 62% making all of their car payments.

When people don’t make enough money to pay all of their bills, they are starting to choose credit cards and car payments over their mortgage – a big shift from years ago when the mortgage payment was always considered the most important.  But in challenging economic times, families understand they  need their credit cards when they’re short on cash – to put food on the table, gas in their cars, utilities on- or at times – cash advances to pay for the mortgage.

While people realize the importance of paying their mortgage – it’s difficult to make that your first priority when you know you  need to keep the electricity on and the heat flowing and there isn’t enough money to go around.  Some borrowers believe that the government and banks will help them keep their homes.

According to the president of the Kelly Group, a credit-counseling service in Connecticut, any 30-day late payment will affect your credit score by as much as 100 points, but a late mortgage is likely to have more pull than a late credit card.

As reported by BusinessWeek.com, “About 20 percent of domestic banks, on net, reported having reduced credit limits on existing credit card accounts to prime borrowers…. About 95 percent of banks that had reduced limits cited a less favorable or more uncertain economic outlook and reduced tolerance for risk as reasons for the action.”

While it had been commonplace for low credit borrowers to experience credit limit decreases, people and businesses with good credit scores and who consistently pay their bills on time were rarely getting cut.

Keep in mind that having a smaller credit limit increases your debt utilization ratio and in turn, can actually cause your FICO credit score to drop.  If you routinely use your credit cards up to your maximum allowed limits and you happen to get a limit reduction – you could find yourself with a lower credit score even if you’re making all of your payments on time.

With a challenging economic climate business owners are currently facing, saving money on the things your business needs to buy can go a long way toward improving your bottom line.  Visa has introduced a program they call SavingsEdge, which is designed to help Visa business cardholders save money at business-related merchants like UPS, for example.   

Business owners can enroll in Visa SavingsEdge through a simple enrollment process, and each time you use your Visa Business credit or check card to pay for business items, the discounts are automatically calculated and posted as a credit on your next Visa Business card statement.

Chances are your business already has a Visa card eligible for SavingsEdge: Chase, Bank of America, PNC Bank, Wachovia and Wells Fargo are all signed up to offer this program to their Visa Business cardholders.  If your card isn’t part of the list, keep an eye out as additional merchants and financial institutions are joining throughout the rest of 2008 and into 2009. 

If you want to learn more, you can visit www.visasavingsedge.com.

J.D. Power and Associates analyzed responses from more than 7,600 credit card users on five different categories to determine what features and benefits made cardholders happy – and which ones did not.

The categories in question were: interaction; billing and payment process; fees and rates; reward programs; and benefits and services – and the responses of cardholders were analyzed from each of these categories to find the highest level of customer satisfaction for each.

American Express won highest customer satisfaction in 3 of the 5 categories, including rewards program satisfaction, fees and rates, and customer call center.  It should be noted that American Express customers are mostly transactors – meaning they pay their balance in full each month, and could be a large factor in why the company scores so high in so many of the categories analyzed.

Other high performers included Discover Card, second in satisfaction for rewards programs and call center service; and Chase who scored third for rewards and call center service satisfaction.

As we await the decision of the $700 billion bailout of the troubled mortgage industry, the discussion of A Credit Cardholders’ Bill of Rights has still got Banks and consumers talking.  The Bill of Rights protects consumers from things that have become a bit too common in the credit card industry – questionable late fees and interest rate hikes without prior notification, and requiring clear disclosure of terms and conditions.

Within minutes of the approval of such measures, several banks expressed their disappointment and opposition, including America’s Banking Association.  They claim such a move will actually increase the cost of credit for both consumers and small businesses, as indicated in their press release.