Credit Cards » Credit Card News » Hikes On The Rise For Credit Cardholders
Date 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 CardholdersMajor 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.

Date June 25, 2009

Small Businesses Not Protected In The Credit Card Bill?

One of the most talked about features of the credit card bill is its lack of support for small businesses. Currently, small businesses are suffering gravely from the effects of the economic crisis. They are in even worse straits right now because the exploitative practices of credit card companies that were the bane of private credit cardholders are also theirs.

Why Are Small Businesses Not Protected In The Credit Card Bill?The worst part is that, while private credit cardholders have something to look forward to a few months from now, when the credit card bill becomes active, small businesses don’t. They will still have to face the credit card industry practices that private credit cardholders will be saved from a few months from now.

The legislation for including small businesses in the credit card bill was present during the bill’s early stages. The sponsor of the bill was Democratic senator of Louisiana, Senator Mary Landrieu who was also the Senate Small Business committee chairman. The amendment that the senator introduced contained two provisions: extending the definition of consumers included for credit protection to individuals who used their personal credit cards for their business, with a limitation of having at most 50 employees and including small business credit cards for consumer protection.

Many expected Senator Landrieu’s amendment to pass easily through senate. After all, it was riding on a very popular legislation which passed through the Senate with a vote of 90-5. Small businesses are also highly regarded among the people of Capitol Hill. It was also being reported at the time that small businesses with company credit cards were seeing large interest rate hikes and a drying up of credit limits. However, when the bill passed last month, Senator Landrieu’s amendment was nowhere to be seen in the final credit card bill.

The National Small Business Association, or NSBA, stood as the amendment’s chief advocate. According to them, they originally approached Senator Dodd’s Banking Committee for support for the amendment. It was not well received. Senate aides from both the democrats and the republicans said that the Banking Committee were chilly towards the idea because it had not really studied completely the implications of extending the protection of the credit card bill to small businesses.

While protection for small businesses is lacking in the credit card bill, there is a provision which will have the Federal Reserve study the issue. The result may strengthen the case for small businesses. There are also several movements in the House and the Senate which may introduce a new bill for small business credit protection. However, thousands of bills are introduced daily and only a rare few gain ground. The chances of a bill protecting small businesses becoming law is realistically quite low and, if it ever comes, it is probably going to take some time.

Date June 2, 2009

Credit Card Law Is All About Compromise

Debates about how good or bad the recently passed credit card law is has been going around even before the legislation got out of congress. There have been some valid points voiced out but, in the end, the credit card law is simply a compromise so that the credit card industry and the consumers survive the on going economic crisis and, perhaps build a better relationship between credit card companies and consumers.

Credit Card Law Is All About CompromiseThe credit card industry found itself on the verge of collapse when, at the outset of the currently ongoing economic crisis, credit cardholders began defaulting on their credit card payments. The industry found itself especially vulnerable because, for the past few years, they had been profiting mainly from credit cardholders who could reliably pay off the penalty fees, not the their debts. The credit card industry had found these types of borrowers to be virtual goldmines as they continued to pay the credit card companies without really seeing any substantial decrease in their debts. The profits the credit card companies took from these types of borrowers have not been publicly released but experts estimate the value to be quite staggering.

When the economic crisis hit, weak borrowers were the first to default. Coupled with the dry up of employment, the credit card industry soon saw record levels of defaults. In an attempt to stem the flow and recover, they raised interest rates and fees, even for their credit cardholders who maintained a good credit standing. The result was a national outcry that led to the formulation and eventual passage of the credit card bill.

The credit card bill addresses many credit cardholder concerns such as: unfair interest rate hikes, obfuscated industry practices and other predatory credit card practices. While credit cardholders are getting plenty of breaks from the credit card law, they won’t be given credit on a golden platter, either. Interest rate hikes will be controlled but, if the credit cardholder continues to perform poorly in terms of payment, they will get hit with high interest rates. Many predatory practices of the credit card industry will be curtailed but they credit cardholders will have to take responsibility for their credit card buying practices.

The credit card industry will certainly lose a lot of their profitability when the credit card law becomes active. However, it does not mean that the system will collapse entirely. They will just have to adjust to a less aggressive style of doing business. They basically have to return once again to basing credit availability on the capability of the borrower to pay off debt, not on how much they can profit from him.

In the end, the credit card bill simply reinforces what was once common practice in the credit industry: credit available where credit is due.

Date May 30, 2009

Preemptive Measures to watch out for before Credit Card Bill Goes Active

The passage of the credit card bill has given credit cardholders a lot to look forward to when it becomes active after nine months. With the credit card bill in place, credit cardholders can expect to see limitations being put in place for interest rate hikes, credit card agreement transparency, and generally, more protection for them from unfair credit card industry practices.

credit cardHowever, a key fact is being overlooked by many of those who are hailing the approval of the credit card bill – the fact that the bill goes into effect only after nine months has passed. Some industry experts are saying that starting now until the law goes into effect, the credit card industry is going to have an open season on earning as much as they can from their customers. This is to offset their impending losses when the credit card bill comes into play.

Since last year, credit card companies have been increasing their interest rates and cutting off available credit for cardholders. The resulting credit card crunch was actually one of the primary motivations for the credit card bill. Cardholders now need to be aware that what the credit card companies have been doing is not going to stop anytime soon. It is going to continue and may even get worse. It’s going to be nine months of continuous unfair and deceptive credit card practices before credit cardholders will see any positive changes in the way their credit companies do business.

The best that credit cardholders can do in the interim months before the credit card bill becomes active is to be as vigilant as possible with their credit cards.

Interest Rates

Credit card companies can still raise interest rates with relative impunity. They are only required to inform you 15 days of the change in interest rate. Therefore, read the fine print of your credit card bill so that you are aware of any changes in your billing. In some cases, you may have the option of closing the account. You should seriously consider doing so, especially if you can find a credit line with better interest rates.

Watch Your Credit Limit

Balance chasing or cutting down credit limits to just above the credit line’s balance is becoming a widespread practice of credit card companies. Watch your credit limit and avoid overdrafts so that you won’t be charged large overdraft fees.

Rewards and Rebates

Rewards and rebates are probably going to end when the credit card bill goes active. If you have some points stocked or awards pending, take advantage of them now as they may soon end or expire.

Date 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 BillRisky 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.

Date May 18, 2009

Credit Card Legislation is Good, Says Government amidst Credit Industry Warnings

The credit card industry has issued warnings that the passage of the credit card bill will mean that credit will no longer be available to some consumers.

Credit Card Legislation is Good

Following a huge outcry from consumers, President Barack Obama and the congress have made a legislation that aims to correct certain practices of the credit card industry, which many consider to be deceitful and unfair. There is a high probability that the legislation will be placed on the President’s desk by Tuesday next week. With the passage of the bill, the credit card industry will experience sweeping changes that will most likely have a negative impact on the profitability of credit card companies. The dire warnings of the credit card industry are most likely to come true as well.

In response to credit industry warnings of credit drying up for some consumers, the government is saying that it is fine with it. Backing up the stance of the government, many senators have been commenting that if getting credit comes at the cost of the credit cardholder not being able to pay it off, then the consumer is better off not having any in the first place.

The biggest impact that the credit card bill will have will be in the credit card industry, however. The most affected will be credit card issuers who issue credit cards to people with low credit scores. Some of these issuers survive on people who are unable to keep up with their monthly balances by having higher interest rates and more stringent penalties. The legislation in the bill will expressly stop this kind of flagrant abuse. Other industry players will also experience a slow down of profits as the legislation puts limits on interest rate hikes. For instance, a provision on the bill requires that if a customer gets an interest rate increase because of late payments, the issuer must lower the interest rate if the customer is able to pay on time for six consecutive months.

Austan Goolsbee, economic advisor of the White House, said in an interview that, “There’s nothing that says credit-card companies need to maintain exactly the same profit rates that they have when there aren’t rules on the road”.

“We’ve gotten into situations where some of the most egregious actors have pushed us to the point where it’s like, ‘Well if you didn’t want to be mugged, you shouldn’t have been walking out in the park because everyone knows there’s muggers out here,’ the economic advisor further elaborated.

Date May 17, 2009

Credit Card Legislation Voting Marked for Tuesday

It seems that President Barack Obama’s all out support for the credit card legislation may finally yield results come Tuesday. According to Sen. Harry Reid, Senate Majority Leader, the U.S, senators have decided that Tuesday evening will be when they will hold a vote on whether the credit card bill will get senate approval or not.

Credit Card Legislation Voting Marked for TuesdayThe credit card legislation under deliberation in the Senate aims to stop controversial credit industry practices. It will also make it much more difficult for credit card companies to issue rate hikes on credit cardholders. The credit card legislation would also greatly limit credit card marketing practices for persons under 21 years of age.

The Senate’s credit card legislation bears many similarities to the Credt Cardholders’ Bill of Rights, which the House passed last April. However, it is much more stringent than the House’s bills in several areas. The Senate’s credit card bill will also take effect much sooner. Once enacted, it will come into effect nine months after. On the other hand, the House’s legislation would only become law a year after it is enacted or on July 1, 2010.

The issue of credit card regulation gained political prominence when households, already heavily burdened with financial problems, cried out against banks who were introducing sudden interest rate hikes and hidden fees, even as they received large financial bailouts from the government.

As a result of the public outcry, President Obama has made the issue a priority and has been calling for support from all sectors. His most recent campaign being his town hall meetings, one of which was recently held in New Mexico. He has also put a lot of pressure on Congress, demanding that they bring the bill to his table when Memorial Day comes.

The banking industry is understandably not very keen about the bill. They have warned that the new regulations being implemented by the bill might lead to a dry up of credit for a number of borrowers. It might also increase all borrowers’ introductory rates.

Whatever the banking industry may have to say on the matter, the legislation still continues to gather steam in the Senate. Sen. Reid recently released a statement saying that the senators had come to an agreement to proceed to a procedural motion vote to proceed to the bill. If the motion is passed, which is highly expected, all pending amendments that remain will be considered by the Senate; after which, they will continue to vote on the legislations’ final passage.

Date May 15, 2009

President Obama Answers Credit Cardholders’ Cries, Continues Support for Credit Card Bill

President Barack Obama continues to be an all out supporter of the credit card bill, which is aimed at protecting credit cardholders from some of the shadier practices of the credit card industry. To recall, credit card companies issued massive interest rate hikes and late fees, which had credit card consumers crying foul.

President Obama Answers Credit Cardholders' Cries, Continues Support for Credit Card BillThe House has already answered the outcry of the consumers with their Credit Cardhoders Bill of Rights and Senate may release their Credit Card Accountability, Responsibility and Disclosure Act (Credit CARD Act) as early as the end of the week. Still, Obama continues to press Congress to hasten the passage of the bill, demanding that they send the bill to him by the time Memorial Day comes.

Just recently, President Obama was drumming up support in Albuquerque, N. M. where he held a town hall meeting. The meeting was attended by many consumers who expressed their views on how they have been deceived and misled by credit card companies.

Last week, President Obama released a statement where he said; “Americans know that they have a responsibility to live within their means and pay what they owe. But they also have a right to not get ripped off by sudden rate hikes, unfair penalties, and hidden fees that have become all too common.”

The credit card issue is a major priority for President Barack Obama. The number of Americans affected by the credit card crisis is staggering. The White House placed the number of households with credit cards at 80%. Of these 80%, almost half have outstanding balances. As the economic downturn continues, finding a resolution for this problem becomes more and more urgent.

The President’s recent actions have not gone unnoticed in the credit card industry. Industry insiders have stated that the legislation that the President and the Congress are pushing for are already redundant as the Federal Reserve has already established new rules, which take on many of the issues that are of primary concern to Congress and to the President. The American Bankers Association has also expressed its disapproval of the legislation, saying that it could backfire. The bill could limit the available credit for credit cardholders.

After his talk in Albuquerque, Obama plans to continue on to New Mexico where he will hold another town hall meeting at the Rio Rancho High School. The meeting will be on May 14. It will be attended by a number of people who have sent letters and e-mails to the president complaining about their bad experiences with their credit card companies.