As the economy continues to remain weak, American consumers are becoming more and more desperate on where to turn to for financial security. Job security is also at an all time low, with unemployment at an all time high. Because of a drastically decreased monthly income, more and more consumers are now forced to rely on credit instead. Unfortunately, credit card companies are currently engaged in putting the squeeze on credit and, as a result, on credit card users.
When the economic crisis came, credit card companies were hit very bad. So bad that many were facing bankruptcy before the government bailed them out -with money from the American taxpayers. Barely recovering, credit card companies went on a campaign to minimize their exposure to risks as much as they can. Credit card holders began experiencing drastically reduced amounts of credit and very high interest rates and fees.
Last May, the government signed into law the credit card bill. The credit card bill is a set of legislation which aims to level the playing field for credit card holders by getting rid of the many predatory practices of credit card companies such as arbitrary interest rate and fee changes, offering credit to high risk borrowers and deceptive and hard to understand billing and contract language. With these changes in place, credit card companies foresee that they will be experiencing a drastic cut in profits, far lower than they were able to generate in the past few years before the economic decline.
While the credit card bill is not set to become active until the first quarter of next year, credit card companies are already changing their business practices to prepare for the bill. Currently, credit card holders are seeing their interest rates soar even higher. They are also beginning to see their credit limits being cut down to almost useless levels. Fees and charges for credit card transactions such as balance transfers, over the limit charges and even merchant charges are also increasing rapidly.
These drastic changes are being implemented not only on borrowers with low credit scores but also on those with very good credit scores. As a result of these changes, credit card holders are finding it very difficult to keep up with their balance payments. What's more, their credit scores are also getting hit hard.
It is fairly obvious that many of these changes are being made by credit companies in preparation for the upcoming credit card bill's activation. Therefore, these changes are probably for the long term.