CREDIT CARDS
Vigilance required
December 5, 2009
>> Credit card companies (maybe yours) are not going to take implementation of the Credit Card Act lying down. They’re busy with a whole bunch of things, like cutting back on rewards programs, inventing new fees, and just plain raising rates.
Self-defense: Call your card company and ask what they’re doing—and planning to do. Let them know if you object. In some cases, the person you speak to may have authority to give you a better deal. Also, keep checking the credit card watchdog sites, which include: www.consumerreports.org and www.CreditCards.com.
Goodbye to fixed-rates?
July 26, 2009>> The
interest rate on your card may still be fixed, but
three big card issuers—Bank of America, Chase, and
Discover—have switched many of their customers to
variable rates. At Chase and Discover, customers
can opt out of the changes by paying off their interest-bearing
accounts. Not so at Bank of America, which requires
customers with open accounts to pay variable rates.
The danger? With fixed rates, banks have to notify
customers if they want to change the rate. Variable
rate accounts have no such requirement. You won’t
know about the change unless and until you examine
your statement.
Self-defense: Call your credit card issuer to see
what they intend to do.
If they plan to switch you to variable rates—or have
already done so—consider changing cards. Check one
of the sites mentioned at the end of the next article.
Inside the new credit card law
June 8, 2009The first thing to understand about the new credit card law is that it will not take effect for nine months. Which means credit card issuers have nine months to continue some highly questionable practices (see below).
The second key point is that there will be no cap on interest rates, even after the new law takes effect. Companies are free to charge any interest rate they like on unpaid balances, a fact that may lead to higher interest rates for people with good credit.
But the law does provide some important protections
for credit card users:
- It prohibits retroactive rate increases on existing
balances and limits rate increases based on late
payment.
- Contract terms must be clearly stated and must apply for at least 12 months after a card is issued.
- Users must have at least 21 days to pay a bill
after it was mailed.
- It prohibits double-cycle billing, which allowed
issuers to use charges from a previous month to
figure interest for the current month.
- Issuers must get the user’s permission before
allowing a fee-bearing, charge that would take
you over your limit.
- Cards may not be issued to people under 21 unless
they prove they can pay, or the parents co-sign.
- Contracts must be written in clear language and
made available on the Internet.
- Regulators must regulate thoroughly and report
to Congress on how they’ve done their job.
- Issuers found to violate provisions of the law will pay higher penalties.
All that may sound good, but before you start applauding, realize that card issuers aren’t going to take this lying down. Instead, they will try to make up for the lost revenue by other means, which will almost certainly include higher interest rates, skimpier rewards, and establishing or raising annual fees for all cardholders, including those who pay on time. Again, it will be nine months before card issuers have to comply with the new law. In the meantime, the old problems may continue:
Consumers are paying high interest rates--about 13 percent for non-reward cards and about 15 percent for reward cards, although some rates run as high as 19.99 percent. Imminent Threat: Your credit card company will still be free to jack up your rate overnight, even if you’ve never missed a payment. Many consumers have seen their rates shoot up from the mid-teens to the mid twenties. And if you miss a payment, heaven help you. Your rate may balloon to over 30%.
Self-defense: Don’t even think about being passive. Call your credit card company to check rates, fees, and reasons. Start by asking for a lower rate. Believe it or not, that often works, and it could save you hundreds of dollars a year. Also, be sure to check credit card sites for the latest news and offers: www.consumerreports.org, www.CreditCards.com, www.indexcreditcards.com, www.billshrink.com, and www.Bankrate.com.
Other kinds of punishment
June 8, 2009>> You may feel it’s fair for a credit card company to raise your rate because you’re late in paying them. Money has a time value. But credit card companies have other reasons—and other forms of punishment—you may feel are not so fair. For the next nine months, credit card issuers have other ways to torment you:
- They cancel your card if they think you don’t use it enough. American Express, Bank of America, Chase, and Citibank have been doing just that, often with no advance notice. The inconvenience is bad enough, but the cancellation also damages your credit score. A relevant statistic tells us cancellations will become an even larger issue: There’s about $5 trillion in credit lines outstanding, only $800 billion of which is being used. Look for the $5 trillion to shrink like a $2 T-shirt.
- They cut your credit line for reasons you’d never guess: You live in a neighborhood with declining home values. You use a mortgage lender they’ve had bad experience with. You work in a troubled industry. You live in a distressed area. And even, you shop in certain stores. All these are used as reasons to clamp down, even if you’re never missed a payment on your card. They may also be used as reasons to raise your rates.
- They don’t care about a disputed charge. You may have a strong case as to why a charge is unfair or just plain wrong, and so you delay payment. That may be all the excuse they need to raise your rate, reduce your credit line, or even cancel your card.
Self-defense: Don’t let things slide. Find out what you credit card company intends to do (or has done). And don’t let disputed bills go to a collection agency. Work something out. Give the credit card company good reasons to change their mind about you or about a transaction. Starting a reasonable dialogue often helps--not always, but often enough to make the effort worthwhile. Check www.allaboutcredit.net.
For more articles on Your
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Travel | Credit
Cards | Health
Insurance
Inflation | Interest
Rates | Mortgages | Utilities | Taxes.
