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June 25, 2009

Hikes On The Rise For Credit Cardholders

At the moment, seeing your credit card interest rates rise could be the worst possible thing. Unfortunately, this is exactly what is going to happen to millions of credit cardholders. In fact, it has already begun. If you are one of the credit cardholders who carry a balance on your credit card and your current interest rate is below 10%, you may soon see your credit card interest rates jump to double figures.

Hikes On The Rise For Credit Cardholders Major credit card companies American Express, Citibank, HSBC, Capital One and Bank of America have been raising the interest rates of credit cardholders numbering in the millions, citing the difficulties of the economy as their reason for doing so. The increase may affect around four million credit cardholders in the U.S., the Wall Street Journal says. So what can you do to save yourself from the devastating effects of these enormous interest rate hikes?

When you find out that your interest rate is being increased, you should contact your credit card company immediately. This is especially true for those who have maintained their balances to low levels. It is possible that your interest rate may have been hiked by mistake. Credit card companies are generally only targeting those with balances on their credit cards. Even if you have a balance on your credit card, you should still try to talk to your credit card company to exempt you from the hike. Credit card companies have been known to issue exemptions in the interest of keeping their customers.

If it happens that you can’t get out of the hike and you just can’t accept it, you can still choose to pay off your current balances using your current interest rates. Just make sure that you don’t make any new purchases. If you do, the credit card company will automatically move you to the higher rate.

Although most major credit card companies are raising interest rates, there are still other credit card companies who are offering decent rates. You should therefore shop around and see if you can find a good card for you. You might be able to move your current balance to a 0% introductory interest rate card. If you do, make sure to pay it off immediately. Missing out on one payment could mean an even higher interest rate for you to deal with. In the current economic climate, paying off any debts as soon as possible is paramount. Therefore, manage your finances as well as you can and try to avoid credit card purchases for now.

May 13, 2009

Credit CARD Act on the Way out from the Senate

It seems that the Senate’s Credit CARD (Credit Card Accountability, Responsibility and Disclosure) Act may be on the way to President Obama’s desk no later than the end of the week. Recently, Senator Chris Dodd, Senate Banking Committee Chairman, announced that a compromise has been made.

The Credit CARD Act of the Senate is part of the government’s response to the growing public outcry over increasing credit card interest rates and other fees. Late last April, the House of Representatives approved the Credit Cardholders Bill of Rights as well. The Credit CARD Act has been in the Senate since early this month.

One major bump in the passage of the act was the debate between the Republicans and the Democrats over debtors who were burdened with huge interest rates because of tardiness over their credit card payments.

The Republicans wanted to grant credit card lenders the right to set interest rates according to a borrower’s previous delinquent payment record. Democrats, on the other hand, were against this, stating that debtors who find themselves in similar situations would already be having a hard time paying their debts. An increase in their interest rates would only make it even harder for them to get themselves out of debt.

Although firmly supporting the ban on retroactive credit card rate increases, Senator Chris Dodd soon realized that the bill would not get Senate approval without the support of Republican senators. A compromise was reached between the two camps.

As the legislation now stands, credit card institutions retain the right to raise interest rates of delinquent consumers under the condition that they would lower the rates if the cardholder is able to meet the bills for six months. They are also prohibited from raising interest rates until the cardholder has been delinquent for at least 60 days. Credit card institutions also have to review the terms of the cardholder every six months. Finally, the Credit CARD act also adds Federal Reserve regulations, which require it to report credit cost and availability updates to the Congress every two years.

Along with the shaky economy and the unemployment problems of the U.S., the sudden rise in credit card interest rates has put a strain on every U.S. Citizen’s finances. The Credit CARD Act will provide some relief for credit cardholders who have been struggling with making their monthly payments on time due to sudden interest rate hikes. Once the legislation gets out of Senate, it will go to President Barrack Obama for approval. The bill will be in effect nine months after the signature of the president has been placed on it.

May 11, 2009

Three Ways To Win Against Credit Card Debt

Credit card debt is a fact of life. That needs to change as soon as possible, especially if you want to survive the economic crisis. To do just that, read on.

Don’t Spend What You Don’t Have

Credit cards are very convenient, no argument. With credit cards, you don’t have to carry a wad of cash every time you go out, you only use a small, thin card to pay for your purchases and you get to shop even if you don’t actually have the money to pay for it. That last one is the problem.

Credit cards make it easy for you to buy something on the assumption that you can pay for it someday. Most people rationalize that they can easily pay off their credit card purchase by paying a fraction of the item’s price every month. Unfortunately, that is not always the case which is, of course why many people are finding themselves in credit card debt nowadays.

If you really want the convenience of a credit card, use a debit card. With a debit card, you are buying with your own money. Thus, you can be sure that when you buy, it is paid for then and there. You won’t have monthly payments or interest rates. It’s a win-win, unless you want to buy something which you don’t have the money for. If, you really need to spend what you don’t have, read the next one.

Pay Your Debts Right

If you read your monthly credit card bill, you’ll see some figures their labeled as “minimum amount due”. Avoid paying that as much as you can.

If you only pay the minimum amount on your bill, you’re not actually paying to lessen your debt balance. You need to remember that the longer your balance stays on your bill, the higher the interest you are getting. So what you really want to do is ignore that deceiving “minimum amount due”, calculate the highest amount you can pay towards your actual debt balance and pay that amount. That way, you avoid the high interest rates and get to congratulate yourself on playing smart.

However, if you’re in over your head already, the last one is for you.

Move To A Cheaper Card

Credit companies love to sell you credit cards. It can be annoying but it can give you a break with your credit card debt problem. If your credit card is an old one, the interest rate on that card is probably higher than that of a new card.

What you should do is to get a new card with a low or even zero interest rate and move your card balance to that. Just be aware that the low or zero interest rate is usually offered for a limited time, usually a few months. Make sure you maximize your payments during that period to get the best out of the deal.

May 10, 2009

Credit Card Companies Going for Premium Customers to Survive

Credit Card Companies Going for Premium Customers to Survive With the state the economy is in now, it is of no surprise that credit cardholders are changing their spending habits, avoiding unplanned buying, and generally preferring to use cash instead of their credit cards whenever they have to buy. Credit card companies are getting hit hard by this complete reversal of American buyers’ consumer habits, which used to follow the mantra “buy, buy, buy”.

With the decrease of credit card use among credit cardholders, credit card companies are losing one of their biggest earners. In general, credit card companies usually get most of their earning through three pathways. These are through customer transactions, revolving credit, and through premium credit card accounts. Since consumer buying has dropped recently and most of them prefer to use cash rather than their credit cards to make purchases, credit card companies are losing credit card transaction earnings. The consumer smart spending trend, partially spurred by the increase in interest rates that credit card companies have implemented, has also meant that revolving credit is no longer a big earner for credit card companies. As a result, credit card companies nowadays are eyeing the premium credit cardholders as their way out.

In a recent summit held in India, it was suggested by Mastercard Worldwide that one way to boost activity for the credit card market may be to charge annual fees. Mastercard Worldwide has been having difficulties continuing its growth with the recent state of the economy. However, Mastercard acknowledged that the only viable market for credit cards with annual fees would be the high end cardholders.

Mastercard may actually be coming late in the game. Competitors Citibank, Standard Chartered, Deutsche Bank, and ICICI bank have already beat them to it. Citibank is known for their Platinum Select Card; Standard Chartered and Deutsche Bank have a partnership going with Emirates Airline, and ICICI Bank is currently partnered with Singapore Airlines.

More and more banks are beginning to see that continued profitability lie in the direction of premium cardholders. Banking insiders recognize that the premium credit card market is better prepared to keep up with their credit card payments and understand much better the need for annual fees.

It seems that, for the moment, banks and credit institutions are going to be marketing aggressively towards the premium cardholders’ market. Most of them are now seeing this market as the best way to continue their growth in the current economic climate. However, bank and credit institutions are acknowledging that the selection process for premium cards is much stricter compared to regular credit card lines. Banks take into consideration several factors before considering an applicant such as educational level, employment industry, annual salary, and their credit history.

May 7, 2009

Keeping Finances Afloat: Avoiding Bank Fees

Today’s economy being what it is, the ability to keep one’s finances float can spell the difference between surviving the economic downturn and going bankrupt. People in the United States have had to quickly adapt their financial habits to fit the requirements of the current state of the economy. While keeping an eye on savings and foregoing the luxury buys are one of the most obvious ways to avoid going bankrupt, some people might be overlooking keeping their eye on their credit card and banking fees.

1176251_27831922 One of the industries most affected by the financial crisis is the banking industry. As more and more credit holders delay payment on their monthly bills, banks are coping with the rising rate of credits being defaulted. As a result, banks are beginning to see bank fees as one of the ways to recover. Case in point, a recent study from bankrate.com has shown that the average ATM fee is now at $1.97. Compared to figures from last year, this represents an 11 percent increase.

Bank fees are one of the most overlooked financial leaks that banking customers miss. These small fees may seem inconsequential at first but, as they begin to add up, they often translate to a considerable amount of lost cash every month. Aside from the aforementioned ATM fees, another fee that banking customers need to be aware of are overdraft fees. Overdraft fees are standard fees that have to be paid when the cost of the transaction is higher than the money available in the account. Overdraft fees can be quite high and estimates from Consumer Reports place the interest as high as 1000%.

Most banks have some form of membership fee for their customers. However, what most customers do not know is that they may be able to negotiate for a lower membership fee with their bank. This, however, depends on the bank. There are also some banks that have a monthly maintenance charge for their clients. As much as possible, these banks should be avoided. Some banks will only demand payment if the account falls below a certain amount, the maintaining balance. So, it is best to know what the minimum balance in the account is and to take care that the amount in the account never falls below it.

Another bank fee vacuum according to bankrate,com are ATM surcharges that are charged when customers use their card on another bank’s ATM. According to the study of bankrate.com, 99.2% of ATMS have these surcharges. It is therefore best to avoid using ATMs, if at all possible. A good strategy is to use a debit card for purchases.

The economic turmoil has placed a lot of pressure on the average American to keep their finances firmly in check. It looks like everyone is going to have to be careful of even the little things when it comes to fighting off the economic turndown.

April 19, 2009

Dialing for Lower Credit Card Interest Rates

Finance experts everywhere insist that you can often lower your credit card interest rates simply by calling and requesting a better interest rate or a modified payment agreement with lower monthly payments. While this may be possible for some people, many people who seem to need the slight financial break the most are finding it impossible to get a lower interest rate on their credit cards when they call and ask.

“I tried calling my credit card company for a lower interest rate. I was told they couldn’t do that and there was nothing they could do to help!” William Brewer of Oklahoma says.

If you try to call your credit card companies and the customer representative seems unwilling or claims to be unable to assist you – don’t give up so easily. Ask to speak to a supervisor, manager, or someone who IS authorized to consider the request for a lower interest rate or modified repayment terms. Remain polite, but be firm – the customer service representatives are likely reading from a script.

People who are most likely able to reduce their interest rates are people who are less likely to need it – those who haven’t missed any credit card payments and have a better than average credit score. Credit card lenders have an elaborate sharing system through their computers. They know what your FICO credit score is, they know whether you’ve paid your other accounts on time or late, and they know how much debt you’re currently carrying. The riskier you are, the more you would benefit from a lower interest rate to help get yourself back on track but the less likely a credit card company is to lower your interest rate when requested.

As the number of delinquencies and defaulted agreements increase, lenders are getting tougher and are unwilling to work with people. Unfortunately, raising interest rates on people who are already struggling to make their payments, or being unwilling to work out modified payment agreements in times of financial need doesn’t make it any easier (or possible, even) for some customers to make their payments and it seems the lenders are just shooting themselves in the foot by making it impossible for people to make payments.

If you do attempt to call your credit card companies to request a lower interest rate or modified payment agreement – do not mention the fear of losing your job as the reason for the request. That puts you in an immediate high-risk situation. If you’ve been making your payments on time previously, simply remind the company you’ve been a good customer and would like to remain their customer but are seeking the best interest rates – if they can’t lower your rate, mention you might transfer your balance to a competitor who can.

April 15, 2009

Credit Card Interest Dropped a Bit

The annual interest rates of three of the more popular categories if credit cards have dripped a bit last week after two weeks of increasing rates. Overall, the interest rates for most credit cards remained pretty steady.

The two cards with dipping interest rates include the balance transfer cards which consumers are offered to aid in consolidating debt from other credit cards. The highlight of the balance transfer card is often a low introductory rate. Consumers take advantage of the low interest rates during the introductory period and pay off the balances before the regular interest rate returns to the account. This gives consumers the advantage of paying off credit card debt without incurring additional finances charges. The drawback is carrying a balance after the introductory period has ended. That rate was down to 13.13% on average, which is a marginal drop from the week prior’s average of 13.15%.

The other category of credit cards with dropping interest rates included the cash back reward cards which decreased from 13.86% to 13.83%. The cash back rewards cards offer consumers cash back in their pockets for each eligible charge put on the credit card. Consumers who utilize the credit card’s cash back rewards system often receive between 1%-5% back in cash based on eligible purchases made with the credit card.

Traditional low interest cards, which are reserved for consumers with very strong credit histories, still offer APR’s lower than the national average at 11.6%, leaving it unchanged from the week prior. Consumers are still struggling to contend with the changes made in the credit card industry, including the higher interest rates and reduced credit limits on their accounts.

The decline in interest rates is slight and does not offer much relief from the burgeoning debt by credit card users. It is becoming increasingly common for consumers to find themselves living off of credit cards as families struggle to survive through job layoffs and the economic difficulties the nation is still facing.