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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 7, 2009

Credit Card Companies Putting The Squeeze On Consumers

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.

Credit Card Companies Putting The Squeeze On Consumers 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.

June 19, 2009

New Threat To Subprime Cardholders: Fee Harvester Cards

While the credit card crisis continues, credit cardholders are facing numerous financial challenges ranging from sky high interest rates and fees to credit card limits dropping as fast as they pay their card balances. It seems that, with the profiteering-prohibitive credit card bill looming up for activation, credit card companies are pulling out all stops to generate as much revenue as they can and to cover their exposure to the current financial crisis. So far, this has meant raising interest rates, even for credit cardholders with clean credit histories, and cutting available credit. Now, a new kind of threat to cardholders has cropped up, targeting primarily subprime borrowers.

credit card news Advertisements are running on TV nowadays offering a special kind of credit card seemingly targeted to subprime borrowers specifically. Subprime borrowers are considered as high risk by credit card companies and are often exempt from getting mainstream credit cards because of their lack of capability to pay off their balances. With this new advertised credit card, it seems that subprime borrowers can finally get much needed credit. However, it seems that these cards take more than they actually give.

The main feature of these credit cards are its unusually low credit limits, usually around $700. It seems like the perfect card for a subprime borrower who wants to have credit but needs to keep it in control. However, once the borrower gets the credit, they are immediately billed for several fees which are of considerable values. These fees often take up 80% of the available credit of the consumer resulting in a drastically lowered credit amount available for the consumer.

The fees charged on these deceptive credit cards usually includes program fees, account setup fees, monthly participation fees, annual fees, add-ons such, and memberships which are included even though the consumer did not enroll for it and does not want it. These credit cards also issue high penalty fees when the cardholders exceed their credit limits. It is no surprise that these cards have been dubbed as “fee harvester” credit cards.

Credit card companies have been offering these credit cards for several years now and their collections have been in the hundreds of millions which means that many subprime borrowers, people who are already in deep financial problems, are being profited from through morally indefensible means. However, experts say that credit card companies do have the legal right to do what they are doing and are actually putting the blame on lax regulations and pre-emptive federal statutes that block state usury laws which could’ve prevented these predatory and abusive practices.

Recently, a national group for consumer advocacy is putting pressure on Congress for the passage of legislation which will stop this kind of credit practices.

June 8, 2009

What Good Credit Actually Means When The Credit Card Bill Goes Live

Consumers heaved a sigh of relief when, last May, President Barack Obama signed into law the credit card bill which was fast tracked through Congress and released also this May. Consumers are seeing the credit card bill as a great equalizer which will give them better control over their credit and curtail the unfair and abusive practices of credit card companies.

What Good Credit Actually Means When The Credit Card Bill Goes Live However, credit industry insiders are warning that the credit card bill may not be as consumer friendly as it sounds.

For the past years, credit companies had been profiting greatly, expanding available credit without taking into account the rising debt of cardholders and profiting mainly from high interest rates and large fees instead of debt payments. When the economic crisis hit, the credit industry found itself in a financial dilemma, burdened with toxic assets and increasing defaults. As a way to salvage what they could, they raised interest rates to astronomical levels and increased fees.

With the credit card bill in place, cardholders are hoping that things are going to change for the better for them, credit wise. However, if credit industry experts are to be believed, their sense of relief may be misplaced.

While the credit card bill does provide legislation which will make credit card practices less predatory and more consumer friendly, these same legislation will also mean that credit cardholders are going to have to deal with credit that is harder to get. For instance, the legislation limiting the capabilities of credit card companies to adjust interest rates of an existing debt means that credit card companies are going to be offering higher interest rates at the very start. It won’t matter either how good of a borrower the credit cardholder is.

Credit card companies see adjusting interest rates on an existing debt as a way to adapt the specific credit line according to the risk exposure of the cardholder. Without this capability, they say that they have no other choice but to spread their risks across their customers, regardless of risk. What this means is that, if a one cardholder is not able to pay the interest rate commensurate to the risk that he or she poses for the credit company, then all the other customers of that company have to pay a higher interest rate as a result.

Whether this scenario will actually happen or not still remains to be seen, cardholder advocates counter. Credit cardholders are getting smarter about managing their credit and, with the disclosure amendments in place, they can make much more intelligent decisions. Competition among credit card companies is another factor in their favor as well.

June 7, 2009

Interchange Fees Finally Getting Some Attention From Legislators

When the credit card bill was released, merchants were less than pleased that they had been left out.

Interchange Fees Finally Getting Some Attention From Legislators While addressing many unfair credit industry practices such as unfairly high interest rates and fees and obfuscated business practices, the credit car bill left out merchant’s pet credit industry peeve: interchange fees.

Merchants pay an interchange fee every time their customers buy from them using credit cards. These fees average at about 1.75 percent of a credit cardholder’s purchase fees. Depending on the credit card company, interchange fees can range from 1.6 percent to more than 2 percent. Interchange fees end up being quite a burden for merchants. Part of the fees also are also being passed on to consumers which end up increasing merchandise prices.

A new measure being focused on in Washington called the Credit Card Fair Fee Act is expected to address the issue of interchange fees. The legislation will focus on giving negotiation powers to merchants so that they can arrange for reduced costs with their banks regarding credit card purchases. Currently, the legislation has just been introduced in the House of Representatives of the U.S. If it turns out to be successful, it will lighten the burden of interchange fees from a whole range of merchants such as restaurants, shops and service stations.

Currently, Mastercard and Visa, the two major payment networks, have power over setting the fee structure for credit card payments. They also control around three fourths of the total number of transactions for general purpose cards. American Express and Discover use their own system.

Complaints about the system have been coming from merchants for a long time and lawmakers have recently joined in. The major complaint is that merchants are blocked from negotiating a more advantageous fee structure for themselves with the Mastercard and Visa payment networks. There have also been complaints about collusion among banks to control the fee structure to their advantage and to block negotiations for lower fees from merchants.

If this new interchange fee bill is enacted, merchants will have more power to negotiate with banks for terms and rates. The Department of Justice will also have an antitrust attorney present during these negotiations.

When the credit card bill was passed recently, the credit industry heaved a sigh of relief over the fact that did not touch interchange fees, at least. However, with this new Credit Card Fair Fee Act making the rounds in the House, the industry may be facing another challenge as credit card companies seek to minimize their losses and restore profits amidst increasing defaults and declining spending.

June 5, 2009

Get Creative To Get Over Your Credit Card Woes

The credit card crunch has every American cardholder scratching their heads on how to keep their finances afloat, especially in this bad economic times.

Get Creative To Get Over Your Credit Card Woes The problem of credit card debt has ballooned ever since the economic downturn first began. Credit card companies, getting burdened by huge profit losses, are trying to bail out themselves by passing it down to their customers. The result: high interest rates and astronomical fees. Clearly, if you have any type of credit card debt now, you need to get out of it as soon as you can.

There are a lot of ways you can get rid of your credit card debt. If you are really in deep, you can seek the help of credit counselors. They can help formulate a financial plan for you which, at the very least can stabilize your finances by lowering your monthly payments while making only a minimal sacrifice on your debt interests. However, if your credit card debt is still at manageable levels, you can try and do it yourself. You just have to keep in mind that getting over your credit card debt needs only some self-discipline and a lot of creative thinking.

Creative thinking means that you approach the problem of credit card debt at different angles, figuring out where you can make changes, even just small ones, to get credit card debt out of your life. To be able to do this, you have to have at least some understanding of your credit card bill. If there is one thing that you must remember, it is this: keep an eye on your interest rates.

Your interest rates dictate how much your bill is going to be at the end of the month. You should also read up on what the penalties will be if you miss one monthly payment. These days, its bound to be astronomical. Finally, be wary of the “minimum amount due”. This does not go to pay off your debt, only the interest.

It would also be great if you understand your credit card habits as well. For instance, if you are something of an impulse buyer, keep your credit cards out of your pocket and, maybe keep it in your desk at home. The convenience of purchasing via plastic has sunk many a cardholder into debt because of impulse buying.

When paying off your debts, if you have many, try to avoid your “extras”. “Extras” meaning the money you have left over after paying off a debt. Instead of using it for purchases, use it to pay off another debt instead. Keep doing this until your debts are paid and you will be pleasantly surprised of the results, and of the “extras” that you will have available once your debts are gone.

June 3, 2009

Credit Card Spending Will Never Be The Same

The economic crash caught many American consumers in surprise. However, financial analysts and watchers have said that it was a long time in coming.

For several years, American consumers had gone on a spending spree with their credit cards without really taking into account what the final costs would be. When the financial crash happened, credit industry experts saw that the soaring credit card debt played a large role in it.

Credit Card Spending Will Never Be The Same The Federal Reserve maintains a survey of the total revolving debt that American consumers carry. Estimates put 90% of this amount to credit card balances. According to their figures, American consumers had $177 billion in revolving debt in September of 1988. 20 years later, in September 2008, figure was $977 billion, an increase of more than five times the 1988 value. However, in the current economical climate, consumers are drastically cutting back and current survey, dating back to last October, show a continuous drop in revolving debt, a rare occurrence.

Originally, credit cards came out as a perk for a bank’s valued customers. However, by the time credit scoring became popular, credit companies began mass marketing credit cards, claiming that they could uniquely tailor the card’s rates and penalties according to the consumer’s financial score. This resulted in a huge expansion of the credit card market. Credit cards became available even to people who had very low credit scores. This will soon come to end once the credit card bill comes into play.

Making credit cards available to people with low credit scores may seem to be a generous move by credit card companies. However, the reality is not so reassuring. People have found out that these credit cards, while seemingly helpful, actually carry high interest rates and high fees which will ultimately bury the cardholder in debt. The credit card bill will put a stop to this by tightening restrictions on how credit cards are issued. It will muzzle many other practices of credit card companies as well.

The credit card industry is, of course not pleased with this. They argue that the credit card bill will cut down their profits. To make up for their losses, they will have to lower available credit, increase initial interest rates and cut down on awards and perks programs. These industry warnings carry little threat to American consumers who are now realizing just how dangerous credit card spending can be. The drop in revolving debt may just be the first indication of a growing change among American consumers’ spending habits. A change which will hopefully lead to smarter, more efficient credit cardholders.

May 30, 2009

Bayh Says Good Credit Cardholders Will Not Be Penalized

Senator Evan Bayh made a stop in Fort Wayne last Wednesday to hold a dialog regarding the recently passed credit card bill and what it will mean for consumers. One of the hottest topics was the credit card industry’s assertion that responsible credit cardholders will be the ones getting penalized because of the practices of bad credit cardholders once the bill becomes active.

Senator Evan Bayh According to Sen. Bayh, the regulations included in the credit card bill are specifically designed to protect and help out credit cardholders who have been hit by high interest rates and fees because they have had to rely more on their credit cards when the economic crisis hit. The senator told reporters stories about people who saw such incredible interest rate hikes, some from 0% to 29%, just for missing the payment deadline by one day. Many of those experiencing such high interest rate hikes belong to the middle class and, according to Sen. Bayh, they were “getting ripped off by credit card companies”.

With the new law in place, credit cardholders who regularly pay off their credit card bills will be protected from interest rate hikes. Credit cardholders will also have more time to examine their bills, as credit card companies will have to mail the bills 21 days before they become due. In the past, the ruling was 14 days. Notifications regarding interest rate and fee changes will also have to be given to credit cardholders 45 days before they are to take effect.

The legislation will obviously provide protection to credit cardholders who are having problems with their bill payments and are keeping their credit cards active by paying only the minimum amount due. In the past few years, credit card companies have been making a lot of money off these kinds of customers – customers who do not default but who try to keep their credit cards active by paying the minimum amount, which does not really subtract substantially from their debts. This is going to end when the credit card bill becomes active.

Critics are therefore saying that because of the large loss in profits from bad credit cardholders, credit card companies are going to turn to good credit cardholders to make up.

“That is not going to be allowed to happen,” Sen. Bayh said.

He cautioned the credit industry from punishing good credit cardholders and said that should it happen, Congress will probably revisit the law to penalize such practices. He also said that the situation is not likely to become reality. Since the credit card industry is very competitive, a credit card company that penalizes good credit cardholders will probably lose their customers to another credit card company with a better offer.

May 29, 2009

Credit Card Industry Earnings Likely to Drop

The credit card industry is in an uproar over the legislations in the recently passed credit card bill. The credit card bill is aimed at legislating many credit card industry practices that cardholders see as unfair and deceitful. For the credit card industry, the credit card bill is a disastrous piece of legislation which will destroy their profitability and, according to them, limit the available credit for American consumers.

Credit Card Industry Earnings Likely to Drop During the past few years, the credit card industry has enjoyed high profitability. Many see that this is coming to an end. Although many see the credit card bill as the main reason for this, it may only be one of many factors.

Although the credit card industry is currently preoccupied with the threat of the credit card bill legislations, it is important to remember that the profitability of the industry was already going down even before talks of the credit card bill surfaced.

With the economic crisis, credit cardholders were unable to keep up with their monthly payments. Whereas many of those who struggled with credit card debt were able to at least keep up with the minimum monthly payments, they were ultimately defaulting when the economic crash came. The increase in credit card debt defaults greatly hurt the credit industry. Aside from that, it also proved wrong one common boast in the credit card industry: their capability to analyze a borrower’s risk and balance with the right interest rate.

Credit cardholder dissatisfaction over high interest rates and large financial fees is also another factor to consider. Considered the root cause of the credit card bill and its popularity, the dissatisfaction of credit cardholders over many of the practices of the credit card industry has been going on for some time. It was only a matter of time before the issue blew up on the credit card industry.

Now, with the credit card bill in place, credit cardholders are going to get the changes that they have been clamoring for. Unfortunately, many of these changes are going to hurt the credit card companies. The legislations on full disclosure of agreements and restrictions on interest hikes and financial fees will hurt the credit card industry the most.

In the past, the credit card industry has profited greatly from credit cardholders who were unable to pay off their monthly bills but did not default, only paying off penalty fees. The impact is hard to calculate, given the credit card industry’s reluctance to release any figures. Many, however, consider the amount to be quite high.

The credit card controversies, coupled with the economic crisis, have also given American consumers a crash course on financial responsibility. Many of them are going to be more careful with their credit card purchases, limiting credit card industry’s previously large profits from subprime borrowers.

May 27, 2009

Will Credit Card Bill Burdens Responsible Credit Cardholders?

The passage of the credit card bill has gone remarkably fast. The House version passed during the last days of April and the Senate version just got passed last week. A few days later and President Barack Obama signed the bill into law.

Will Credit Card Bill Burdens Responsible Credit Cardholders Credit cardholders are excited to finally see some sensible regulation for credit cards. Long feeling oppressed and frustrated by arbitrary interest rate increases and unreasonable fees, credit cardholders have been pressing for the passage of the credit card bill since it first came out in congress.

On the other hand, the credit card industry has been against the credit card bill from the start. Their stance is quite understandable, considering that, with the passage of the credit card bill, they have been essentially stripped of their most lucrative customers the past few years, subprime borrowers.

Partially to limit support for the credit card bill, the credit card industry has been issuing dire warnings of what is to come should the credit card bill become law. One of the most ominous is that responsible cardholders, those who keep their payments up to date and maintain good credit scores, will get hit hard and will basically end up supporting bad borrowers.

The credit card industry says that this will happen because, in order to make up for their losses and decrease their exposure to financial risks, they will have to make credit much less available to credit cardholders, regardless of credit standing. Annual fees will be making a comeback. Initial interest rates will also soar to balance out the inability of borrowers to increase interest rates on existing debts. Reward point programs will also be put a stop or, at least severely curtailed.

These dire warnings, though worrying, may not actually come true. What will assuredly happen when the credit card law becomes active is that credit cardholders will again have some confidence and trust on their credit cards. They won’t be worrying about high interest rates and fees and other unfair credit card industry practices.

The credit card bill won’t save all credit cardholders, however. Those with large credit card debts will have a ways to go to get out of debt. At the very least, however, they won’t have as hard a time paying down their debts.

With credit cardholders much more confident, cardholders will most likely be returning to their plastic for their purchases. They will also most likely be more choosy and intelligent in their choice of credit cards, what with the new credit card bill transparency measures. This will mean high competition among credit card companies. With competition taking place, the credit card company able to offer the best features and incentives package wins which makes the probability of the industry’s dire warnings coming true very low indeed.

May 24, 2009

Consumer Groups Hail Credit Card Bill

With the passage of the credit card bill from the Senate, consumers are seeing a bit of hope from the economic crisis. Consumer groups are also hailing the credit card bill and are excited to finally see a tough legislation for consumer protection come out of Congress.

Consumer Groups Hail Credit Card Bill Travis Plunkett from Consumer Federation of America recently said, “This is probably the strongest piece of consumer legislation to pass Congress in a decade.”

Although consumer groups consider the credit card bill as a step in the right direction, they feel that the bill can only provide partial protection for consumers against high interest rates and fees from creditors.

The credit card bill addresses many consumer concerns about troublesome credit card industry practices. Some of the most important amendments in the bill include prohibiting credit companies from retroactive interest rate hikes on old balances. Credit card companies are also required to provide fill disclosure to their customers regarding interest rate increases, transaction fees, and other related costs.

Dissatisfaction among consumer groups revolves mainly around the timeline for the implementation of the bill. They are also critical of the fact that the credit card bill can only slow down the surge of bills and does not provide a cap for interest rates.

Currently, once the President has signed the bill, it will become effective only after nine months have passed. This is mainly to give credit card companies some time to evolve their operations to meet the requirements of the bill. In the meantime, consumer groups are concerned by the fact that credit card companies continue to charge exorbitant fees and high interest rates on cardholders.

Although the bill puts a lot of limitations in the way credit card companies run their business, consumer groups say that there is still a lot of things that it allows companies to do which could be debilitating to consumers. For instance, although the bill puts restrictions on raising interest rates on old debts, it still allows credit card companies to hike up the rates on new purchases. It also does not stop credit card companies from changing their interest rates based on the cardholder’s payment history on another credit card.

Gary Schatsky, a financial planner in New York said, “It’s more than we could have expected in recent history, but in the end, it got watered down”. He also predicts that even as credit card companies are forced to make their terms more understandable, in the end, it all boils down to whether the buying habits of credit cardholders remain as they are or whether they learn from the credit crunch and change.

May 23, 2009

Credit Industry to Face Severe Losses with New Bill

The credit card bill has just made it out of Congress and is headed for President Obama’s desk. The bill is expected to be signed by the President on Friday. As the credit card bill nears completion, the credit card industry is looking ahead to an ominous future.

Credit Industry to Face Severe Losses with New Bill Risky borrowers have been very lucrative for credit card companies for the past few years. Lending to borrowers with low credit scores may mean that the chances of them paying their debts are low but creditors have not been daunted. Instead, credit card companies turned the situation around and made enormous profits from the fact that payments from credit cardholders with low credit scores usually go to interest rates and fees instead of their debts. Basically, these cardholders pay the credit companies not to decrease their debt but to be allowed to keep them and to have access to more credit.

All this is going to change once the credit card bill becomes law. The credit card bill primarily penalizes credit card companies that take advantage of consumers’ inability to meet their monthly debt payments and profit mainly by offering very high interest rates and excessive fees. It will also put some control on the ability of credit companies to arbitrarily raise interest rates and fees. Lastly, the bill will aim for full disclosure between the credit card companies and the consumers. This means that credit card companies will have to make credit agreements publicly available by posting them online. Credit card companies will also have to inform consumers well ahead of time of any interest rate increases and give viable reasons for them.

Financial analysts are trying to calculate how much of an impact the bill will have. The task is made doubly difficult by the fact that card companies rarely disclose how much they earn from interest rate hikes, penalties, and other fees. Robert Hammer operates a credit card consulting company. He puts the credit card industry’s revenue loss of income from overall interest at $10 billion. This year, figures place the penalty fees that credit card companies will be imposing at $20.5 billion. Notably, last year, it was $19.1 billion.

According to Calyon Securities analyst, Craig Maurer, Credit card companies whose portfolios skew towards over-limit fees, late-payment fees and penalty repricing have the highest risk. Already, the industry is beginning to look into how they are going to realign their portfolios. Executives from the industry continue to emphasize the loss of credit, especially for risky borrowers. Front end fees are also likely to rise to offset the limitations imposed on raising interest rates after a cardholder fails to pay on time.

May 22, 2009

Amendment in Just Passed Credit Card Bill to Protect Students

The recently passed credit card bill primarily addresses many of the unfair practices of the credit card industry. One particular amendment in the bill specifically calls for the protection of students. Sen. Bob Corker and Sen. Dian Feinstein are the sponsors of the amendment.

Amendment in Just Passed Credit Card Bill to Protect Students Credit card debts from college students are fast becoming a serious problem. Credit card companies often exploit college students, giving credit card offers to them while knowing that they are hardly in the position to be able to pay off their debts. Oftentimes, college students graduate with an already large amount of debt to their name, even before they find employment.

Sen. Corker had this to say, ““Far too often, young adults don’t read the fine print of credit card offers and rack up huge debts that follow them throughout life. As a father of two daughters in college, I’m constantly making sure my girls aren’t signed up for any of the many credit card offers targeting college students.”

About the amendment, Senator Corker explained, “This amendment reforms credit card marketing practices aimed at college students so that the terms are fair, transparent, and more easily understood by the consumer. It would also commission a study to fully examine the problem of student credit card debt so we can help make sure these young Americans aren’t burdened and hampered by excessive debt.”

Senator Feinstein also added that, “Colleges should not be encouraging their students to sign up for products with high interest rates and fees that can get them bogged down in debt.”

Senator Feinstein believes that college students are far more susceptible to get into credit card debt, as they lack the experience and the knowledge on smart credit management. Usually, these debts also stay with them for decades, making it difficult for them to start their professional careers. According to the Senator, the amendment simply puts some “common-sense restrictions” to the credit card industry, which will stop deceptive industry practices from abusing college students as well as other young consumers.

The amendment included by the two senators in the credit card bill will protect students from credit card debt through:

disallowing credit card companies to offer gifts to students who apply for credit cards
require public disclosure from universities who have marketing agreements with credit card companies
require reports from credit card companies on their financial compensations to alumni associations and schools through said agreements and what the companies are getting in return
ask for the assistance of the Government Accountability Office to determine the extent of these agreements and their effect on student debt

May 15, 2009

How to Keep Your Credit Rating Up

The economic downturn has gotten the entire country in an uproar. Prices of basic goods are soaring, employment is going down, and interest rates are jumping from as low as 1.7% to as high as 25%. One thing that the economic collapse has proven is how important good credit rating is.

Banks have upped their interest rates to astronomical heights since the economic crisis began. They have also drastically lowered the credit limits for most credit holders. In most cases, those who have bad credit ratings come out worse off than those with good ratings. This is only logical, as banks place more trust on people with good credit and are more willing to give them some leeway. They are also more anxious to keep the business of people with good credit rating.

For those who are in heavy debt, getting out of it in this economy can be very difficult. Paying off high interest rates with very little extra cash and with a bad job market only worsens the problem. Fortunately, people with bad debt can get their interest rates adjusted to more reasonable levels. Again, those who have good credit ratings get off lighter than those who do not.

The simplest way to get your credit score high is to make sure that you don’t have any debts in the first place. This means paying off your bills before the deadline. Usually, the more consistent you are at paying on time, the higher your score gets.

One of the biggest culprits in getting your credit score down is your credit card. Make sure to use it wisely. A good rule is to keep your balances low on all your credit cards. Keep in mind that the proportion between what you owe and what is available to you in your credit lines is what dictates your score. Another important issue related to this is closing unused credit cards. Unused credit cards mean unused credit available to you. If you close the card, you will lower your available credit, which will affect your credit score.

It is also not advisable to apply for too many credit cards. Although getting a lot of credit cards increase your available credit, which helps your credit score, you might be labeled as a risky borrower instead, which will lower your credit score.

In the event that you find it difficult to pay off your credit cards, make arrangements with your creditors for a lowered interest rate or some other plan to help you keep up with your payments as soon as you can.

It is important to remember that getting your credit score higher can take time. You will have to keep at it if you want your credit rating to improve.

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