Drastic Changes In Credit Card Practices Hurting Consumers

The combination of the economic slowdown and the threat of the Credit CARD (Card Accountability, Responsibility and Disclosure) Act have credit card companies in a mad scramble to maintain current and secure future profitability. For most of them, this means getting rid of the most unfavorable of their clients.

According to Syracuse University’s Whitman School of Management assistant professor of accounting Mitch Franklin, credit card companies are accomplishing the above by introducing more difficult terms for credit card holders and by raising interest rates well before the Credit CARD Act get activated on February of 2010.

Franklin recently said that even people who have credit scores as high as 800 are getting their credit lines are cut. Credit scores are the credit card industry’s standard measure for the desirability of a borrower. Consumers who maintain high credit scores are considered to be more credit deserving. At the moment, a strong credit score is around 750.

Increased interest rates and more difficult terms aren’t the only tricks credit card companies have brought to the table either. A currently popular trend is credit card companies increasing their minimum monthly payment rates. An increase in minimum monthly payment rates forces credit card holders with revolving monthly debts to pay considerably higher minimum payments per month, a budget buster for many credit card holders.

Credit card companies are also currently busy moving credit card holders from fixed rate interests to variable rates. Variable rates are usually tide to the national prime rate. This particular move by credit card companies circumvents the Credit CARD Act legislation limiting arbitrary interest changes from credit card companies and requiring them to give ample notice to credit card holders for interest rate changes.

Other tricks include the introduction of new fees, cutting down of new offers as well as slowing down on their rewards and rebates programs.

Gail Cunningham, National Foundation for Credit Counseling spokeswoman said, “Why is this happening? Some think that the issuers want to get in front of the new rules that will be imposed on them in 2010. Others think that it is due to creditors being on the ropes financially and wanting to decrease their risk while getting any outstanding debt repaid as quickly as possible”.

As these practices continue, credit card holders are getting even more burdened financially. Already burdened by the slow economy and the high unemployment rate, they are clamoring against these burdensome changes that credit card companies are introducing. Already there are movements in Congress for solutions to the problem. The Center for Responsible Lending, for instance, recently cited card issuer “tricks and traps” and urged Congress to move the Credit CARD Act activation to as early as December 1.