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July 29, 2009

Credit Companies Doing Their Best To Beat The Credit Card Bill

It seems that the government may have made an enormous mistake giving credit card companies several months leeway to adapt to the credit card bill. Credit card companies are now doing everything they can to increase profits before they have to deal with the credit card bill. Unfortunately for credit card holders, this means more expensive interest rates and fees and drying up credit.

Credit Companies Doing Their Best To Beat The Credit Card Bill The credit card bill, signed May this year, is set to become active next year, February. Although some of the amendments of the credit card bill will become active early this August, the majority of the amendments, especially the most useful ones, will still be several months away. In the meantime, credit card holders will have to face up to a growing number of credit card billing changes that are stifling credit and raising credit card costs for them.

Recently, Bank of America, Discover and JPMorgan & Chase moved their fixed rate credit cards to a variable interest rate setup. It seems that the credit card companies have found a loophole in the credit card bill which will negate the amendments in the bill stifling their abilities to change credit card interest rates at will. The credit card bill only controls credit cards with fixed interest rates. Nothing is said about variable interest rate credit cards. As a result, credit card companies are moving the majority of their credit cardholders to a variable interest rate card.

The move to a variable interest rate credit card will mean that the interest rate will be tied to a specific benchmark, the prime interest rate. As of the moment, the prime interest rate is near the zero mark, making the move somewhat attractive for credit card holders. However, by tying the interest rate to the prime interest rate, credit card companies are virtually guaranteed that the interest rate will rise in the near future.

Many credit card holders are finding themselves trapped by their credit companies. While many do not approve of the move to a variable rate interest rate, they have no choice in the matter. Credit card companies are firmly behind this move and are not allowing their customers to opt out of it.

As this is happening, credit card companies are also busy raising interest rates and fee charges for credit card holders. It may be time for credit card holders to rethink if maintaining a credit card is still worth it. A move to a debit card is highly recommended for those who cannot live without the convenience of plastic.

July 29, 2009

Debt Settlement Offers Coming From Unlikeliest Of Places: Credit Companies

The rising unemployment rate and the economic slow down is hurting many American consumers. Consumers are now finding their budgets stretched thinly just to cover their basic expenses. Many are finding out that their monthly take home pay is just enough to cover their daily expenses. As a result, they have had to prioritise their spending and one of the first budgetary expenses to go is credit card debt payments resulting in the rise of defaults and charge-offs for credit card companies.

Debt Settlement Offers Coming From Unlikeliest Of Places: Credit Companies The rise in defaults and charge-offs are also hurting credit card companies considerably. In May this year credit card defaults reached 10%. This is the highest it has been for some time now. With 10% of their uncollected debts considered as unrecoverable, credit card companies are now desperately seeking for ways to recover at least some of these debts.

Credit card companies have the option of selling these debts to collection companies. However, this will mean that they will be seeing pennies for every dollar. A more attractive option for credit card companies is to offer a debt settlement arrangement to their debtors.

In a credit card debt settlement arrangement, the credit card companies get a percentage of the original debt from the debtor in exchange for which the credit card company will consider the debt paid. Although the credit company does not get the original amount back, at least they still get a percentage of the original debt. This also has some appeal for credit card holders burdened with debt, mainly because this will allow them to settle their debts for a value much lower than the original debt.

Some credit card companies have taken it to themselves to call up their debtors to offer them a debt settlement program. Credit card holders carrying debts on their credit cards can also call up their credit companies themselves and ask for a debt settlement arrangement. Not everyone is eligible for a debt settlement arrangement. However, considering the current economic situation, the chances that a credit card holder can secure a debt settlement arrangement for herself or himself is quite good.

Although a credit card debt settlement arrangement might seem like a great idea for getting rid of credit card debt for credit card holders, they need to be aware that there is an unpleasant side effect. If a card holder goes for a debt settlement arrangement, his or her credit score will receive a large black mark for it. Considering that this black mark stays with them for seven years, credit card holders should think twice before going for a debt settlement arrangement.

The rising unemployment rate and the economic slow down is hurting many American consumers. Consumers are now finding their budgets stretched thinly just to cover their basic expenses.

July 28, 2009

How To Manage Your Credit Card To Avoid Financial Disaster

If you are a credit card holder nowadays, it almost seems like you are holding a financial ticking time bomb. As you might have noticed, the whole consumer-sphere is abuzz with the recent controversies regarding credit cards and the credit companies who issue them.

How To Manage Your Credit Card To Avoid Financial Disaster A lot of the buzz that is going around is about the widespread practice among credit card companies of increasing interest rates as well as fees while introducing new fees as well. Because of these changes, many credit card holders are finding it more and more difficult to maintain their credit cards.

What is even more worrying is that, while credit card companies are making it hard to pay off your debts, they are also cutting off your available credit. Some even go so far as to use “balance chasing” schemes which is when the credit company lowers your available credit to a level just above your balance. The end result is that you have a large balance on your card while also having very low available credit. This can completely ruin your credit score as your credit score is the ratio between your available credit and your balance. Also, you will find that you can hardly use your credit card anymore because you don’t have available credit left.

So how do you keep your finances from imploding due to all the pressure that credit companies are putting on you? First, now is really the best time to maintain a balance free credit card. You have to try your best to pay your balance every month. In this regard, you might want to think about using your credit card less so that you are sure that whatever balance you have you can pay it off at the end of the month.

While using your credit cards less nowadays is highly recommended, this does not mean that you should stop using your card altogether. That will just give your credit company an excuse to close down your credit account. You will definitely need a healthy credit card line to maintain a healthy credit score. So charge purchases on your credit card now and then. Just make sure to keep it at manageable levels.

Finally, with the way credit card companies are hiking interest rates and fees and cutting available credit, you should really be very aware of any changes that are going to happen to your credit card account. Always read your bills and look out for any communications from your credit company which might contain details about interest and fee hikes or available credit reductions.

July 17, 2009

Card Holders Seeing Sudden Credit Card Cancellations

The credit card industry is in a state of upheaval right now due to several factors. First is the general economic downturn which affected gravely the credit industry, sending several major credit companies to the brink of bankruptcy.

Card Holders Seeing Sudden Credit Card Cancellations The rise in delinquencies and write offs were primarily one of the major causes of the credit industry crisis and the situation is still continuing today, albeit there have been some improvements and the industry is getting back some of its confidence. Finally, the credit card industry is also currently in a state of overhaul to adapt itself to prepare for the upcoming activation of the credit card bill on the first quarter of next year.

As a result of all of these, credit card companies are now introducing several changes to their business model, many of which are hurting credit card holders. Currently, credit card holders are seeing their interest rates and their fees go sky high. New fees and charges are also being introduced. Credit card companies are also actively cutting down available credit for their credit card holders. However, the worst thing that can happen to any credit card holder is getting their credit card suddenly canceled.

If you have a credit card, this is probably something you ought to be aware of. Credit card cancellations are usually done by a credit card company for a number of reasons. The most common is when they consider a credit card holder as too high a risk for them to continue maintaining as a customer. However, they can also cite any other reason as well.

Credit card companies can cancel your credit card at anytime with but one condition: that they inform you ahead of time, usually thirty days, before they cut you off. The problem is that most notices are sent through snail mail, so you can just imagine your chances of getting their notice on time. Plus, you might have moved too and forgot to update your mailing address or you might be traveling when the notice arrived.

Getting your credit card canceled can be quit alarming. Many people have had the nasty surprise of paying with their card only to have the purchase rejected because the card has been canceled. What’s even more worrying is that, right now, some credit card companies are cutting off the credit lines of people who are relatively low risk borrowers. So even if you are up to date with your payments, you might still get your credit cut.

So far, the practice is still not that widespread but there are indications that it may soon be. If you become a victim of this kind of practice, you should try calling up your credit company, though there is little hope that you’ll get your credit line back.

July 14, 2009

Card Holders Need 20/20 Vision To Survive Credit Crisis

The credit card bill will soon be active in a few months. With the bill in place, credit card holders are finally going to see their credit companies take on a semblance of fairness when dealing with them. Or will they?

Card Holders Need 20/20 Vision To Survive Credit Crisis Set to become active next year, on February, the credit card bill may be coming in too late. The release of the credit card bill may have been met with widespread approval by credit card holders and their supporters but the credit industry positively loathes it, and with good reason. The credit card bill is going to bring a lot of legislations which is going to change the way credit companies run their business. Most of these changes are aimed towards benefiting card holders, an unfamiliar situation for the credit industry which has traditionally seen all out support from government, even when they were passing practically Machiavellian legislations for themselves.

The credit card bill is going to keep interest rates much more affordable for card holders. A card holder who fails to pay off his or her bills on time may get an interest hike but credit companies are required to monitor him and review his status every six months. If he begins to pay off his bills on time and the circumstance requiring the rate hike is no longer necessary, then the hike is removed. Credit card holders will also get better transparency from their credit companies. The lack of transparency in credit adjustments, agreements and billing language has long been one of the most controversial ways that credit companies collect fees from customers.

For instance, Bank of America recently issued to their customers fine print notices which informed them that their low rate credit cards will be getting a much higher interest rate. Customers can opt out of the deal if they reject the increase. The window of time that customers have to reject the interest rate increase is relatively small too, so if they missed the notice in the fine print when it arrived, they would likely get the higher interest rate before they could opt out.

This is actually a common tactic for credit companies. Another common example is the much-debated minimum monthly payment. The minimum monthly payment is the smallest payment a card holder can pay to his credit company to ensure that he can continue using his credit card without being cut off from credit. The problem with minimum amount payments is that a larger part of the amount goes to paying interest rates and fees rather than paying off the debt. As a result, the credit card holder pays his debts longer and ends up paying more as well.

July 13, 2009

Fight For Credit Card Regulations Not Over

The credit card bill signing into law was greeted with widespread support from consumers and consumer advocates. Many believed that the law would finally bring to close the era of predatory lending and other unfair practices from credit companies. However, many soon realized that a fundamental flaw in the bill would cost credit card holders even more: the nine month window before the credit card bill becomes active.

Fight For Credit Card Regulations Not Over While the credit card bill was signed last May, full activation of the bill would not begin until February of next year. The nine month reprieve for credit card companies was meant to give them enough time to change their business machineries to adapt to the new credit card legislations. Unfortunately, credit card companies soon made the nine month leeway a nine month open season to profiting as much as they can from credit card holders and establishing harsh and oppressive credit card rates and fees meant to ensure continued profitability for them when the credit card bill becomes active.

Now consumers are finding themselves in even more trouble than they were before the credit card bill became law. Interest rates are increasing almost by the week, the situation with fees are just as bad and credit companies are introducing even more fees added on to existing ones and available credit is being cut down as fast as credit card holders can pay off their debts. An even more ominous move by credit companies is moving their fixed rate credit cards to a variable rate. This will ensure that, even when the credit card bill is in place, the card holder’s interest rate will still fluctuate without any prior notice.

These happenings have alarmed many financial watchers, not the least of which is Senator Christopher Dodd. Chairman of the Senate Banking Committee, the senator was a supporter of the credit card bill when it was in debate at the Senate. Now, with the bill still inactive and credit companies taking advantage of their nine month leeway, he recently issued a request for an increase in government monitoring of the credit industry, writing a letter to the heads of the FDIC, the Office of Thrift supervision, the National Credit Union Administration, the comptroller of the currency and the Fed.

The senator is pushing for government regulators to move on to enforcing some of the laws in the credit card bill, given the current developments in the credit industry. His worry over the situation is quite valid as recent reports have shown that credit card companies are engaging in severely opportunistic and oppressive practices and are relatively unchallenged, being the ones charged with reviewing their own policies.

July 9, 2009

Credit Card Holders Need To Adapt To Survive In Current Credit Landscape

It is an overwhelmingly obvious fact that credit card companies are now quickly changing their rules for credit card use in order to alleviate the problems that they are facing due to the economic recession and, more importantly, be ready for the activation of the credit card bill.

Credit Card Holders Need To Adapt To Survive In Current Credit Landscape The credit card bill, officially known as the Credit Card Accountability, Responsibility and Disclosure Act was drafted early this year and signed into law by President Barack Obama just this May. The bill aims to control the way most credit card companies run their business, from limiting the freedom of the companies to arbitrarily raise interest rates to forcing them to make their bank statement and contract languages much easier for consumers to understand and comprehend. With the bill in place, the government hopes to level the field for consumers.

Ironically, what was meant to lessen the credit burden of consumers became one of the driving forces for the current widespread credit cuts and interest rate increases that credit card companies are doing. Right now, many credit card holders, regardless of the health of their credit scores, are finding it more and more expensive to keep their credit cards. As credit card companies continue to adapt their business model for the new credit card bill, credit card holders are getting hit very hard.

While credit card companies are busy adapting, the majority of credit card holders are unfortunately still clinging to their old ideas about credit. The biggest concern among them are usually their credit scores. More and more credit card holders are trying to live down some very bad terms from their credit card companies out of fear that opting out would hurt their credit score.

One example is the excessive rate hikes that credit card companies are imposing on their customers. Although most credit card holders would want to avoid having to live with an excessive rate hike, they are too scared of getting their available credit cut off which will hurt their credit score. Credit card holders are also worried that the continuing cutting down of credit will also negatively effect their credit scores, so much so that many of them are willing to sacrifice their finances in the interest of keeping their credit lines open.

Credit card holders need to refocus their finances on what is important: the avoidance of high costs rather should be top priority, not the credit score losses. Unless they are planning to make a loan soon, credit card holders should consider getting rid of high interest rates even though it means losing some credit score points.

July 9, 2009

Watch Your Credit To Survive The Credit Crunch

As the magic hour when the credit card bill becomes active approaches, credit card companies are scrambling to tighten up credit and raise interest rates to ensure that, with the bill in place, they can still keep their profit margins.

Watch Your Credit To Survive The Credit Crunch One of the most controversial amendments in the credit card bill will stop credit card companies from arbitrarily hiking up their interest rates and fees. As a result, most credit card companies are making their interest and fee changes now, while the credit card bill is still several months away.

As a credit card holder, you, along with the majority of credit card holders in America, have probably seen your interest rate go ski high while your available credit was cut off. Like you, many credit card holders are finding it harder and harder to keep up with their debts and to use their credit cards. If you want to survive the on going credit crunch, you should probably take heed of these hints.

If you are carrying a balance, do as much as you can to get rid of that balance. If you are one of those stuck with high interest rates, try calling up your credit company to arrange for better rates. If you find yourself stuck between a choice of cutting down your monthly payments and getting hit on your credit score, you should probably consider letting your credit score get hit. Unless you plan to take a loan anytime soon, your credit score will bounce back with time and some effort on your part. Having to live with high monthly payments could bring you to financial disaster.

If you are planning to move your balance to a low interest card, be very careful. Many card holders have been trapped because they moved their balance to another credit card, not knowing that the credit company would later on raise the minimum monthly payments. Credit card companies are also hiking up their transfer fees so you also need to consider that.

If you are lucky enough to have no balances in your cards, then try and keep it that way as much as possible. Be very careful of fees as well which are now at very high levels. You should always be aware of your credit limits. The cost of going over the limit can be quite high so always keep an eye on the credit limits of your card. In this regard, keep an eye on your mail as your credit company might be lowering your credit limits at any time.

July 8, 2009

Interest Rates For Credit Cards Rising Before Credit Card Bill Comes

Many thought that the credit card bill would be the end of high interest rates and fees in credit cards, not least among them the lawmakers in Congress and the consumer advocates who backed the bill aggressively when it was still being debated.

Interest Rates For Credit Cards Rising Before Credit Card Bill Comes However, the leeway of several months that government has given credit card companies to adapt their business to the new legislation seems to have had a very nasty side effect. Now, credit card companies are using the available time to raise their interest rates and fees way ahead of the scheduled activation of the credit card bill on the first quarter of next year in preparation for stricter laws about arbitrary interest rate and fee changes. Needless to say, many are irked by the fact but are quite helpless about it.

Recently, Chase credit card holders found themselves burdened with a nasty surprise from their Chase credit cards. Chase raised the minimum monthly payment required from 2% to 5%. As a result, many card holders were trapped between paying very high minimum monthly payments or getting their interest rates increased by several percentage points. Many of these card holders were also those who transferred their balances to Chase to take advantage of a low interest rate offer.

Chase, along with Discover also recently increased their maximum fee charges for balance transfers. Chase’s rate was originally at 3% while discover’s was at 4%. Both companies increased their rate to 5%. Carriers of Bank of America credit cards also saw an increase for cash advance and balance transfer fees of 4%, from a rate of 3%. The majority of credit card companies are also continuing to cut credit card limits for their customers while steadily increasing their interest rates. The rate of the credit cuts and interest fee increases have noticeably increased since January of this year.

According to experts, credit card holders can expect to see these kinds of practices from credit card companies until February, when the credit card bill becomes active. At the moment, credit card companies are under no pressure to stop these kinds of practices and can continue to increase rates while decreasing available credit without any penalties.

The situation is exactly what many feared would happen if the credit card companies were given too much time before the bill became active. Now that it is coming true, legislators are effectively powerless to stop the continuing onslaught of higher interest rates, higher monthly payments and dropping credits. Once the credit card bill becomes active early next year, credit will have become too expensive for regular consumers and they will have too look elsewhere for the privilege of paying in plastic.

July 8, 2009

Credit Card Terms Likely To Change Against Cardholders As New Bill Approaches Activation

Last May, President Barack Obama signed into law the credit card bill. The credit card bill introduces several regulations that aim to help credit card holders get fairer treatment from their credit card companies. The bill contains regulations that will stop the arbitrary raising of interests and fees, minimize the offering of credit to high risk consumers such as those below 18 and force credit card companies to have clearer and more easily understood languages on their credit card agreements and bills.

Credit Card Terms Likely To Change Against Cardholders As New Bill Approaches Activation Many of these changes would certainly help in reinvigorating the finances of many an American consumer. Unfortunately, the bill will not become active until February of next year. In the meantime, credit card companies are doing their utmost to change their credit card terms in an effort to earn as much as they can now and to prepare for the credit card bill when it becomes active.

Right now, many credit card companies are raising interest rates to very high levels. They are also increasing their fees for most credit card transactions such as balance transfers and cash withdrawals. This is because, when the credit card bill becomes active, credit card companies won’t be able to raise their interest rates and fees just as easily. Because credit card companies also see that credit is going to be harder to secure next year with the bill in place, they are also cutting available credit right now. Thus, many credit card holders are finding that they have less and less credit available in their credit cards.

The effect of these drastic steps among consumers is quite devastating. Many credit card holders are already having a hard time paying off their debts. With the increasing interest rates and fees, many are finding it more and more difficult to continue paying their bills off. It is not hard to see that the number of delinquencies and charge-offs may soon rise. With their available credits cut off, card holders are also finding that they have lost what little financial leeway they had to maneuver. More and more credit card holders now find themselves in a high risk of going bankrupt.

Credit card companies are also not reserving these drastic steps for their less than stellar borrowers. Credit card holders with high credit scores are getting hit just as bad. What’s more, what the credit card companies are doing are also having a large negative effect on most credit card holders’ credit scores.

While a lot of people are thinking that the activation of the credit card bill will save them from credit card problems, the credit card industry is now making sure that that is not the case. Credit will become more expensive by then and only time will tell if that is a good or bad thing.

July 6, 2009

Getting Out Of Debt Is Now Imperative

One of the biggest drawbacks of using credit cards for purchases is the high risk of getting yourself into debt. If you are a smart consumer, then you are probably keen on keeping up to date with your monthly balances and you probably pay it off every month.

However, emergencies and sudden financial disasters, such as the current economic crisis and high unemployment, can easily destroy your monthly credit card payment schedule. As a result, you have probably found yourself in deep debt now. Unfortunately, now is the worst time to carry any balance on your credit card.

Credit card companies have been trying to recover from several financial setbacks that have happened to them in the past few months. The economic collapse which led to a consumer buying slowdown meant that credit card spending slowed down as well. Consumers, now faced with a weak economy and an increasing unemployment rate began to hold on to their cash more. The result was an increase in debt delinquencies and write offs which cost credit card companies billions of losses. While trying to stem the tide, credit card companies were recently hit with the credit card bill, a set of legislations which will cut off the more predatory practices of credit companies and attempt to balance the field for consumers. This has led to a panic among credit companies as they foresee a slow down in earnings once the credit card bill becomes active which should be on the first quarter of next year.

Due to the many financial problems and profit threats that credit companies are facing, they are now aggressively doing everything they can to earn as much as possible and to change their business models so that they are positioned favorably when the government activates the credit card bill. It is well known that any problems that credit card companies face will ultimately be passed to the consumers and the situation is no different now.

Currently, credit card holders are seeing rapid increases in their interest rates and credit card fees. More and more banks are also introducing fees into their credit cards such as yearly membership fees. They are also cutting available credit as fast as they can. The end result of all these changes is that credit card holders are finding it more and more difficult, not to mention expensive, to pay off their debts and to use their credit cards. Even worse is that these changes are having very negative effects on the credit scores of many credit card holders.

These days, if you are carrying any balance, you are certainly in a world of trouble. The best move is to pay it off as soon as you can and, once you’ve done so, avoid using your credit cards in the meantime.

July 5, 2009

Consumer-Costly Changes Being Implemented By Credit Companies For The Credit Card Bill

The credit card bill’s passage may have provided some hope to consumers over the way that their credit card companies were charging and billing them but the changes are still several long months away. In the meantime, credit card companies are continuing their objectionable practices and are even making them worse.

Consumer-Costly Changes Being Implemented By Credit Companies For The Credit Card Bill As the credit card bill’s activation comes nearer and nearer, credit card companies are beginning to get worried that they may not be able to make a profit as well as they used to a few years ago. As a result, they are now raising their rates and fees before it gets too difficult to change them when the credit card bill becomes active.

A recent study has shown that credit has now become more and more expensive for credit card holders and credit card companies are getting more and more aggressive in collecting as much as they can from consumers. One major observation was that credit card companies are still as deceptive as ever, something which will hopefully change, once the transparency laws included in the credit card bill becomes active. One example of this is the concept of universal default. Universal default is an exploitative practice among credit companies where the credit card holder experiences higher interest rates on his debt because of debts from other credit card companies. Basically, the credit company will review the debts that their customer has, even debts from other creditors, and will adjust their rates according to their findings. Nowadays, credit card companies are avoiding the term “universal default” and will say that they do not practice it. However, they are still basically doing the same thing, though they’re referring to it by another name, usually stating “market conditions”.

Credit card companies are also getting more and more aggressive over issuing charges. A lot of them are charging fees for bill payments that involve human to human interaction, usually around $10 to $15 and rising. Fees for late payments are also getting higher, ranging from around $20 to $38 approximately. Over the limit fees are also getting higher, around $32 to $39. Cash advance charges and balance transfer charges are also getting higher and higher.

Observers are saying that these changes are the results of the credit card companies adapting itself to the upcoming credit card bill. Many credit companies are afraid that the credit card bill will stifle their ability to generate profits, though some analysts say that credit card companies will still be earning large profits even with the credit card bill in place. In the end, it is the consumers that are getting hit hard and many are moving away from credit cards to consider other options such as debit cards.

July 5, 2009

Credit Card Companies Chasing Profits Before Credit Card Bill Goes Active

For many people, especially consumers, the passage of the credit card bill probably felt like a huge victory over the credit card companies. For many years, credit card companies have done their utmost to profit from their customers, from offering credit to subprime borrowers in exchange for excessive interest rates and fees to predatory practices such as sudden rate and fee hikes.

Credit Card Companies Chasing Profits Before Credit Card Bill Goes Active The credit card bill was created to answer these problems and level the playing field for consumers. Unfortunately, even though the bill has passed, it won’t be active until the first quarter of next year. In the meantime, credit card companies are doing their utmost to cash in before the restrictions begin.

Currently, many of the major credit card industry players are raising their rates, presumably to help them gear up for the implementation of the credit card bill. With the restrictions in place, the biggest profit sources of credit card companies, interest rates and fees, are going to take a hit. It is going to be harder for them to raise interest rates, so they are raising their interest rates now, while the bill is not yet active.

Recently, Chase credit card holders experienced had an unexpected and unpleasant surprise. The credit company raised their minimum monthly payment requirements from 2% to 5%. Many card holders were caught unaware resulting in several thousand consumers now faced with large monthly fees. Chase has also increased their charges for balance transfers, something which Discover has also done as well. Bank of America also changed their transaction fees for cash advances and balance transfers from 3% to 4%. Along with Citibank, Bank of America is also continually cutting their credit limits lower and lower and raising their interest rates, a trend which has been on the rise not only among these companies but also with other companies since the start of the year.

Although many are complaining that these exploitative actions are worsening the financial conditions of the majority of consumers, it is hardly a surprising move by the credit card companies. The primary motivation of these companies have always been profit and, with their profits threatened, they are cashing in now as much as they can.

The biggest sector suffering financially right now are the consumers. Many of them are questioning the move of the government to give several months leeway for credit card companies to adapt to the new laws. Why the long months before activation? With new regulations in place, credit companies will have to update their systems and reorganize their current structure to allow for the changes being introduced by the credit card bill. Although, practically speaking, even if the law had been set to become active a month after it was signed, credit card companies would still have done their best to profit within that time frame and the credit card crunch would have been worse for consumers.

July 4, 2009

Secured Credit Card May Be The Way To Go For Those Under 21

The credit card bill was drafted for the purpose of protecting consumers from the dangers of overusing their credit which usually results in heavy debt. Case in point: the current credit crunch is a direct effect of the large defaults that credit card holders started to do once the economy tanked and consumers began losing income.

Secured Credit Card May Be The Way To Go For Those Under 21 The legislation in the credit card bill will changes some of the fundamental rules on how credit card companies run their business. The primary target is the preference of these companies to take on high risk borrowers in the hopes of earning more from them from interest and fee payments instead of from debt payments.

Credit card companies have been against the bill from the start. They claim that it will ultimately result in a drying up of credit, among other things. Although their statements are often times overblown, they are right about one thing: once the credit card bill becomes active, credit is going to be tougher to get. But that’s not necessarily a bad thing.

Most credit cardholders who are under 21 are usually students who are attending college. Recognized as outgoing, adventurous and big spenders, they have long been a favorite target for credit card offers. Unfortunately, this has led to an alarmingly large number of graduating students carrying worrying amounts of debt. College students also carry an average of four credit cards and only a small percentage actually pay off their debts every end of the month. The result is a generation of American graduates carrying enormous debts even before they’ve landed a job.

Because of this, the credit card bill included some amendments protecting card carriers under 21 years of age. With the credit card bill in place, those under 21 will not be able to get credit cards as easily as they used to. They will either have to prove that they have an independent income capable of paying off their credit card usage or they have to have a co-signer for their application, which usually means their parents.

Although credit cards are harder to get, it does not necessarily mean that college students should miss out on the convenience of using credit cards. A viable option for them would be secured credit cards. Secured credit cards function similar to credit cards, only that they are secured against a deposit to the creditor from the card holder. Thus, when the card holder makes a purchase, his purchase will be secured. If he is unable to make the monthly payment, the credit company will simply take it out of his deposit.

With secured credit cards, college students have the convenience of using a credit card like service while staying away from the risk of going into debt.

June 28, 2009

Credit Card Protection: Not A Smart Move

The credit crisis has everyone worried about their financial stability. In this tough economic times, credit cards have become a vital life line for every American consumer. Thus, their worries about not being able to make the monthly payments and losing available credit is quite valid. It is also quite understandable why many American consumers are very interested in protecting their credit. However, one thing they should never do is get credit card protection. Here is why.

Credit Card Protection: Not A Smart Move American consumers have probably seen these offers for credit card payment protection plans smartly inserted along with their monthly bill statements. Most plans cost around fifty cents to the dollar for every balance of one hundred dollars to buy. According to the plane, when you are unable to pay off your bill, your payment protection plan will be activated. When it does, the plan will pay your bill’s minimum amount due or a fixed amount, depending on the plan. The plan will also help you avoid ruining your credit score because, when the plan becomes active, the credit company will not report the situation to the credit bureaus. Credit card companies are, ostensibly offering these plans to help you recover whenever you miss out on your monthly payments.

Consumer advocates are not impressed with credit protection plans, however. According to them, these plans are too costly to be of any benefit to consumers. Plus, they provide a false sense of security to credit card holders.

According to CEO of LowCards.com, a website offering credit card information, Bill Hardekopf, consumers who buy into these credit protection plans are liable to find themselves in deep trouble. While the credit protection plan does pay your bill when you can’t, it will not protect you from interest rate charges. The interest rate fees plus the upfront cost of the credit protection plan would only make your debts larger. Thus, in the event that you actually use your credit protection plan, you will end up in deeper financial trouble instead of the other way around.

Hardekopf elaborated that, if you carry a balance of ten thousand dollars, you would be paying a hundred dollars every month for the credit protection plan. This is already a considerable cost and, what’s more, this cost is added to your balance and you are earning interest because of it. “Just the sheer cost of it is probably the biggest knock against it.” Hardekopf said.

Another problem is that, while the plan will pay your bills if you go overdue, it probably won’t pay all of it. That means that you are likely to accrue interests even with the credit protection plan in place.

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