Credit card issuers are doubling minimum payments from 2% to 4%, raising interest rates, cutting limits and canceling cards for any reason, no reason, too much activity, too little activity and/or no activity at all.
Interest rates of 10.9% are increasing to 19.99% and up to 29.99%. Late fees are being imposed with any delay in your payment being posted. Over limit fees are further increasing your outstanding debt. The combination of fees can add hundreds of dollars to your balance and there is nothing you can do about it after the fact.
Never has there been a better time to swear off credit cards and pay down your debt than right now. Go ahead, pull them out and cut them into tiny plastic pieces. It might hurt a little but it’s the path to recovery.
Good Credit Isn’t Enough
No one is immune from being cancelled or having their terms changed. Card holders with impeccable credit who have never made a late payment and are not anywhere near their personal credit limit are having their rates doubled and in some cases tripled. Millions have had their accounts closed for lack of use after being good customers for years. Explaining and complaining seldom helps. Closed is closed according to the banks in most cases.
Here’s a story from my own life. I’ve been a customer of First National Bank of Omaha for 40 years with an almost perfect FICO score, never a late payment and no rollover balance. But they canceled my Visa card due to inactivity. The customer service representative I called was kind and patient yet insisted she could do nothing about it. Not one to give up a lifetime of credit history, I wrote to the bank president. His assistant called me a week later and offered to let me reapply and see if I qualified for a new card. Still miffed and not really needing the card, I agreed ONLY if they would reinstate my “member since” date to 1969. They did.
Help On The Way (But Self-Reliance Is Even Better)
Help is coming in July 2010 when sweeping changes to credit card rules take effect. Welcome relief from federal regulators and not a moment too soon for those drowning in credit card debt and vulnerable to these exorbitant fees. Credit card issuers will need to redesign, rebuild and re-price their offerings based on the largest crackdown on credit card companies in 30 years.
But that’s then and this is now. Whatever rules are in place, you need to understand how your credit card issuer assesses charges and penalties. This information can literally can save you hundreds of dollars. Watch the triggers closely to avoid getting trapped paying 29.99% on your outstanding balance. Transfer the balance to a lower cost card if necessary. Paying on time and doubling your payment will also help put you back on the financial straight and narrow.