You know that letter that arrives in your mailbox periodically from your credit card company? The single page filled front and back in a #8 font, single spaced and with no pictures, clearly formatted to be sure your eyes glaze over before you reach the halfway point? All the better to make sure you don't read it, right? This time you better read it. The changes coming are like none you've seen before.
The credit card companies, unhappy about changes passed by Congress and aimed at changing the way they do business, have pulled out all the stops and are reworking their fee schedules and other rules and regs in order to offset what they believe will be a multi-billion dollar loss to them. Even if your credit card philosophy is the same as mine...never charge what you cannot pay off at the end of the month, you could get hit by some of the proposed changes.
Credit has been so readily available for so long and with so little requirement to qualify for it, that who among us doesn't have at least one card you never use but keep 'just in case.' Besides, haven't we always been warned that closing a credit card account will adversely affect our credit score? So how does a MONTHLY INACTIVITY FEE strike you? Would it upset you to pay $240 a year NOT to use your credit card?
Some companies are closing accounts for inactivity which can change your ratio of used to available credit and drop your excellent credit score to something less excellent. (Thinking about buying a home? This might matter to you!)
Not surprisingly the VARIABLE interest rate on credit cards is going up. I could have told you that without reading the “informational letter” from the credit card folks. But if you have a FIXED rate on a card it has probably already been converted to a variable one. Not to worry, you'll just transfer your balance to a card with an enticing lower rate. Gotcha...new fees associated with that.
As I began to look into the changes being implemented by credit card companies I ran into many stories of consumers getting caught in some pretty sticky wickets. Start googling and you'll see what I mean. But I am not a financial adviser and have no special skills for assessing the impact of what is coming. My only advice is to PAY ATTENTION to YOUR situation and be proactive in seeking any help you may need.
Here's what I do. I have ONE business credit card and ONE non-business card. I use them all the time but only as a convenience. I have the discipline to pay them off monthly without paying finance charges and I like having the record of my expenditures. I never, ever, finance a purchase over time on a credit card. Never.
I'm going to pull my free annual credit report and make sure there are no unused cards languishing out there. Have you ever canceled a card only to find out they never really canceled it? I have. I'm going to talk to my personal banker and financial adviser and simply ask them if there is something I am not doing that I should be doing.
Now is not the time to sit back and wait for all of this to shake out. Read the fine print and don't assume your good credit will not be affected if you just don't change anything you already do. Maybe this is cynical but one financial writer believes the credit card companies are hoping to mitigate consumer outrage by targeting many of their changes to those of us with good credit so that they may not create situations that look good on the nightly news!
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SarahGray Lamm is a licensed, full time, residential real estate agent in the Raleigh Durham area of North Carolina. She specializes in serving the real estate needs of home sellers and home buyers in Chapel Hill, Carrboro, Durham and Northern Chatham County.
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The unintended consequences are not as bad as the problems some had with their credit cards.
I had a company that I have had cards with for 12 years try a rate increase on me. I didnt close it but I did pay it off except for 20.00. Closing it would have hit my score by as much as 60 points.
SarahGray,
Gotta pay them off every month. Gotta.
I do, and recently saw that the interest rate was raised to 24.67%. How do people survive borrowing money at rates like that?
Elite, I agree! But the days of being smug about good credit are over. We all need to be vigilant and proactive! Thanks!
Laura, thanks for helping me make my point! Have a great 2010.
Mike, Hi! And I would say they don't! Ours is the ONLY viable plan.
Great Post SarahGray ... and do I even have to tell you the temperature in hell is at absolute zero before I pay a credit card company NOT to use their card!!!! : )
A lot of consumers are going to be shocked when they see their new rates or annual fees - even those with great credit!
SarahGray: I always say congress cannot write or re-write laws fast enough to keep up with the crooks (illegal and legal). These companies are hoping that their patrons are not keeping tabs on the changes. You are exactly right when you say these changes can wreak alot of havoc.
Another great post containing plenty of food for thought and a call for action on our part ...
Gene