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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 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.

June 15, 2009

Capital One’s Unique Approach To New Credit Legislation

The credit industry is understandably worried about the new credit card bill signed into law by President Obama last May. The credit card bill, an answer to the mounting clamor of credit cardholders burdened with increasing interest rates and fees, will put a number of restrictions to the credit card industry. Among others, the credit card legislation will disallow interest adjustments on existing debts, limit who the credit card companies can offer credit to and push for complete transparency on credit card contracts.

Capital One's Unique Approach To New Credit Legislation These restrictions that the credit card bill will introduce are seen by the credit card industry as highly restrictive. Credit card companies are already saying that the loss in profits due to the bill will be huge. As a result, they will be taking drastic measures to cover their losses such as increased APRs, cutting down rewards programs and the return of annual fees. Credit card companies will also be more restrictive on issuing credit which will mean a loss of credit for consumers. Although the credit card companies still have a few months leeway before the credit card bill becomes active, they are now implementing rule changes in preparation for it.

Competition among credit card companies remain at a healthy level, however. Capital One for instance is taking a different path towards maintaining profitability while dealing with the credit card bill.

Major credit card companies, including Capital One, have been issuing notices to credit cardholders of changes in APR and fees. This is in preparation for the industry regulation changes that will happen when the credit card bill becomes active. Capital One, however aims to be more attractive to credit cardholders and gain the loyalty of existing customers by deferring price increases.

Most credit companies who are issuing notices for APR and increases will be implementing these changes to within a few months’ time from the date of the notice. Capital One, however will defer price increases for a period of time, which can be as far off as Janury 2011, before their increase takes effect. In the meantime, transactions being done before the “activation” time of the increase will be treated as promotional and no increase will be implemented.

This comes as a very welcome surprise for Capital One credit cardholders who are probably worried about the increases in APRs and fees of their other credit card lines. This move of Capital One also makes its credit cards more attractive to consumers especially at a time when consumers are very wary of credit cards and are apt to be more critical on their credit card payments.

June 12, 2009

Who Is Really In Charge Of Your Credit?

Credit card companies, it seems, go out of their way to make their practices as obfuscated as possible. For instance, have you every run across these credit cards that offer 0% interest rates?

Who Is Really In Charge Of Your Credit? At first glance, the offer seems awesome. That is actually what the credit card companies are banking on, that you, as a consumer, will buy into their product based mainly on your “first glance” judgment. Of course, if you were really to take a step back and think about it more, you’d realize that a 0% interest rate is just too good to be true. And, once you ask about the terms of the card, you find out that it is. Once you miss a single monthly bill, your 0% interest rate zooms right to 10% or even more.

There is also this kind of “condescending” practice of credit card companies where they give you customer service assistance as if you don’t really deserve the help you are getting. Ask them for help and they put you on hold. They love to put you on hold, don’t they? Have you ever tried negotiating with a customer service person for, say foregoing your automatic interest rate increase because you missed your due date by one day? Basically, you have to hold something over their head in order for them to do anything. You could threaten to cancel your line (won’t work if you have a bad record with them) or you could appeal to their sense of business courtesy. You can remind them how loyal a customer you’ve been and how you are the best credit customer in the world that you deserve an award for it (again, won’t work if you have a bad record).

Obviously, credit card companies (and maybe cardholders as well) have forgotten who really is in charge in the game of credit issuing and paying. Credit is, basically a convenience. It is not a necessity as many credit industry supporters would say. Consumers, by and large can do without credit. Albeit they will have to make drastic changes with their lives (which has been heavily affected by credit card spending habits), it is very doable.

The credit card bill, when it finally becomes active, will level the field somewhat. The legislations in the bill will force a more moderate kind of credit practice. However, in the end it is the cardholders themselves who can force a change in the way credit card companies. All they have to do is to start being in charge of their credit.

June 10, 2009

Smart Spending Means No Credit Card Woes

With the way the economy is going, you really don’t want to get yourself into credit card debt. That’s why, as much as possible, you should try to make smart choices whenever you use your credit card. If you are thinking that you are better off getting rid of your credit cards, don’t. Your credit cards are the primary link to your credit score and, if you surrender your credit cards, you will most definitely lose out on your credit score.

Smart Spending Means No Credit Card Woes One of the worst ways that you can get into credit card debt is when you fall for their aggressive marketing practices. Credit card companies are always looking to expand their customer base. More customers mean greater profit. Thus, you are always going to find some very attractive offers from credit card companies. Take this with a grain of salt. For instance, some companies offer credit cards with waived annual fees. Make sure that you know how many years that fee is waived. 0% interest rates are another common trap. With a deal like this, they are just waiting for you to miss one monthly payment. Once you do, you’ll see your interest rates rocket sky high.

Another thing to remember is to be smart with your monthly payments. Obviously, make every effort to zero out your monthly balance every month. That means charging your purchases smartly, making sure that you will have the money to cover your balance at the end of the month. You don’t want to be charged late fees. You should also make a point of reviewing your monthly statement carefully. Banks are notorious for charging you with unearned fees or with ghost purchases. Make sure that you are being billed fairly. If you have any doubt, call the bank immediately. This is also good practice for detecting credit card fraud.

As much as possible, use your credit card for credit purchases. Some credit cards offer a service wherein you can also withdraw cash from an ATM using your credit card. Don’t use this service. For one thing, the charges are way higher than a normal ATM card. Also, you don’t want to get used to this kind of practice. Small withdrawals have a way of ballooning over time so that you will realize only when it is too late that you’ve accumulated a huge debt.

If you are fond of the convenience of using credit cards, you should look into debit cards. Debit cards can be used just like how you use credit cards. The main difference is that, with a debit card, your purchases are taken against an existing balance, maybe in your bank account. That means that whatever you charged to your debit card, it is already paid the moment the transaction goes through. No need to worry about monthly bills.

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 Compromise The 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.

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.

However, 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.

May 25, 2009

The Dilemma of Credit Card Balance Chasing

The passage of the credit card bill last Friday has the credit card industry all shook up. The legislation contained in the bill will change many of the fundamental practices of the credit industry, some of which were downright abusive. The bill will be implemented after nine months, giving credit card companies some time to adjust to the new legislation.

The Dilemma of Credit Card Balance Chasing Credit card industry practitioners have constantly been issuing warnings that the passage of the credit card bill would mean making less credit available for consumers. The credit card industry says that, when the bill passes, it will mean that introductory interest rates will increase and annual fees will once again be charged to credit cardholders, regardless of credit standing.

Another practice which experts are warning credit cardholders about is balance chasing.

Balance chasing is essentially when the credit card company lowers your credit line as you pay your balance. In the end, the cardholder gets a drastically lowered credit line even as he or she has paid off the balance of the credit card.

To illustrate, say for instance that a credit cardholder has a credit card with a limit of $10,000 and he has a balance on it of $8,900. Wanting to lower his debts and give himself some financial leeway, he makes a payment of $2,000. This leaves a balance of $6,900 and he would expect to have an available credit of $3,100. However, with balance chasing, the credit card company would actually lower the cardholder’s available credit. In this instance, from a credit limit of $10,000, it will drop to $7,000. This will continue to cycle until the credit cardholder’s credit limit will be far lower than the one that they started with.

Balance chasing has a very negative effect on the cardholder’s credit score. Since the credit limit constantly remains close to the credit balance, it would seem that the cardholder’s balance is always near his credit limit. It also makes the credit card essentially useless to the credit cardholder during times of emergencies because of the greatly lowered credit limit.

Although balance chasing is not widely spread for now, some industry observers see this as something that will soon become common practice. As the credit card industry continuous to try to limit their exposure, balance chasing becomes more and more appealing.

Obviously, balance chasing will it hurt most for those with a balance in their credit cards. It becomes more and more important for cardholders to payoff their balances as quickly as possible to make sure that they have credit available when they need it most. Consumers should turn away as much as they can from using their credit cards and either use cash or debit cards instead.

May 24, 2009

Last Minute Credit Card Bill Amendment Worrying Retailers

A last minute provision inserted into the credit card bill release by the Senate last Tuesday has major retailers in the country a bit worried.

Last Minute Credit Card Bill Amendment Worrying Retailers The last minute provision of Sen. Robert Menendez prohibits companies that issue credit cards from opening credit card accounts without first thoroughly considering the ability of the bower to meet the required payments. The rules on just how companies can comply with the provision will be left to the Federal Reserve.

The provision could have a debilitating effect for retailers, specifically those who issue store-branded credit cards.

Some major retailers issue their own credit cards which usually offer perks to customers, specifically aimed at encouraging customers to purchase big-ticket items. Major retailers put their sales from such credit cards as high as one third of all their sales. Store-branded credit cards are usually offered and approved immediately, based on the credit cardholder’s credit score. These cards also have special perks to entice consumers, such as a “no cash out” offers, discounts, and 0% interest offers that last for a period of several months. These cards usually have large interest rates that usually average at 20%.

With Sen. Menendez’s provision in place, retailers are worried that their ability to issue cards to consumers within minutes would end. A more thorough credit score check would take several days, as the company would have to examine the consumer’s income and debts or else get a complete credit report. The long wait, retailers say, would jeopardize their ability to complete more big-ticket sales as well as slow down their ability to market their credit cards to a large number of customers.

Sen. Menendez said during an interview that the provision was meant for application to all types of credit cards, which means that store-branded credit cards will be affected as well. However, the senator said that issuers may be able to meet the rule’s standards by relying on the self-reported income of borrowers.

“I think the overwhelming universe of those who apply, apply honestly”, the Senator said.

Senior Vice President of the National Retail Federation Mallory Duncan said, “It is a potentially problematic amendment”. However, he does concede that, should consumers find it inconvenient, lawmakers may revisit the provision at a later time.

Consumer Federation of America Leigislative Director Travis Plunkett also released a statement supporting the provision, saying that it supports the bill’s primary goal of encouraging sustainable credit. Plunket also clarified that his consumer group has no objections against deferred payment arrangements as long as the terms are fair and the consumers are well aware of the details of the agreement.

May 20, 2009

Credit Card Legislation, a Step in the Right Direction

Credit Card Legislation, a Step in the Right Direction Government legislators are up in arms over what to do with the economic downturn that is recently plaguing the United States. Their latest bid to stem the tide is the much hyped credit card bill scheduled for release Tuesday.

The government is still reeling from the financial crash that happened late last year. The effect of the crash still continues up to this day. RealtyTrac Inc. recently reported that the foreclosure problem has worsened. This April, a jump of 32% of American homeowners facing foreclosure was seen compared to last year’s figures also taken in April. The rate of jobless Americans also race to 8.9% this April and predictions put the numbers even higher in the coming months.

Clearly the American public needs some breathing space and legislators are hoping to provide just that with the credit card bill. However, even if the bill were to be signed immediately, the earliest that they can expect to receive its benefits would be after nine months.

Once President Barack Obama puts his signature on the bill, the credit card industry will have nine months to update its business practices to reflect the legislations of the bill. The credit card bill will largely do away with arbitrary interest rate increases and high transaction fees that have been the bane of credit cardholders.

The credit card bill will have other provisions as well, which encourage transparency and fair practice in the credit industry. One provision requires credit card companies to make their credit card agreements available online. Credit cardholders will also be allowed to pay their bills through the phone or through the Internet for free. Interest rate increases would also be applicable only after the credit card company has given the cardholder a 45-day notice and an explanation for the rate increase.

A key provision of the credit card bill addresses what is being called in the industry as “universal default”. Universal default is when a credit cardholder’s interest rates are changed by a lender when the credit cardholder misses a payment to another lender on an unrelated debt.

The credit card bill will give a cardholder a leeway of 60 days to catch up with the debt payments before seeing an interest rate increase. If the cardholder consistently pays the required monthly amount for six months, the credit card company must return the interest rate of the cardholder to the previous rate.

The credit industry is against the bill, naturally, and they are warning legislators that the bill could restrict access to credit for some Americans. However, lawmakers are dead set on the bill, stating that this time around, the credit industry has just gone too far.

May 19, 2009

Credit Card Debt: Where the Problem Lies

Credit Card Debt: Where the Problem Lies The credit bill is going to get passed soon enough, but is it really enough to get Americans off debt in the long term? Some say that legislation will take care of that by limiting and reigning in the credit card industry, which seems to have been running wild the last few years. Others argue that the problem is actually the American people themselves, specifically their spending habits.

So, where does the problem lie? If you really take the time to look at it, you’ll see that the problem is shared all around and every part of the problem, from the creditors to the credit cardholders, holds the solution to the entire problem.

Judging by the recent public outcry over the unfair and downright deceitful practices of credit card companies, it definitely seems that credit card issuers are the root cause of the problem. Their sudden rate hikes and imposition of high transaction fees to their customers without any prior notice and without even taking into account their customer’s credit history is certainly right there with outright highway robbery.

Other questionable practices perpetrated by the credit industry include allowing overdraws so that they can make money off the interest or the overdraw fees, extending credit to people who are not in a stable enough financial situation to pay off their credits and, perhaps the sneakiest of all, increasing interest rates if the customer pays late to an unrelated credit card company or even a utility company.

The credit card bill, which will soon come out of congress, should stop these practices and some others. However, there is some degree of truth over justifications of credit industry insiders who say that the credit card industry never forced their customers to sign up to their programs or to charge excessively on their credit cards.

It is very true, cardholders were never forced to charge expensive dinners, luxury gadgets, and unnecessary expenses without considering if they could pay for it or not. The mantra for the spending habits of America seems to have been “spend, spend, and spend” for the past few years. It also didn’t help that the credit card industry encouraged this habit by lowering their credit card application requirements, offering deceptive packages and generally giving consumers enough leeway to bury themselves in debt for the next ten years or more.

Although the credit card industry has a lot to answer for, clearly the spending habits of the American consumer need to change as well. Fortunately, the economic crisis, the employment slump and the oppressive actions of the credit industry have put such a strain on every American consumer’s finances that they are doing just that.

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.

May 18, 2009

Answers to Some Banking Practices that Puzzled You

Overdrawing

You might have wondered why, when you make ATM withdrawals or debit purchases that are higher than your available balance in the bank, the transaction goes through.

Answers to Some Banking Practices that Puzzled You It might seem like the bank is playing the fool but, in reality, this practice is the direct result of banks wising up over the years. In the past, banks would most likely have cut you off if you overdrew your account. Nowadays, they let it through because they’ve learned that they can earn more by charging you special fees for overdrawing your account.

The same also goes when you go over you credit card limit. If you go over the limit of your card, your bank will allow it but you will then be charged a fee for it.

Minimum Amounts and Surcharges

In your purchasing experience, you may have encountered merchants who specifically require a minimum amount before they allow you to use your credit card. Some merchants also have surcharges if your purchase amount is below a specified value.

These are actually not rules from the credit companies and these merchants may actually be breaking the rules. Major credit companies such as MasterCard and Visa don’t allow requiring a minimum amount from cardholders. They also don’t allow surcharging, though there are exceptions with government and educational institutions. Most merchants may not be aware of these rules, however. They usually get their card terminals from third parties. They are, however, aware that they pay increasingly higher percentage of purchases as the transaction amount gets lower. Thus, they invent lower limits for credit card purchases or add surcharges.

0% Balance-Transfers

0% balance-transfers seem to be the perfect solution to handling your debt problems. It’s quite simple. If you have a debt in a credit card line with XX% interest rates, you move it to a card that is offering a 0% interest rate for a limited time, usually 12 months. The question is; how does the bank see profit?

First off, just by transferring the amount, you will already pay a fee. Then, after you transfer, you miss a single payment and that 0% interest rate jumps to 20% or more. You might also go over the 12-month limit and then you’ll end up with a rate of around 16% or more. Another possibility is that you make the minimum monthly payments for the whole 12 months and you try to move to another 0% interest card. However, the requirements will be tougher and you won’t qualify. Thus, you keep your card and you pay off your debt. After your debts are paid off, you keep your card and the bank continues to earn from you.

May 17, 2009

Settle Your Debts Easily with Debt Consolidation Loans

If you are one of many Americans having debt problems, then you know that the situation is becoming worse and worse as the economic crisis continues. As the available cash in American households begin to dwindle, the more debts a household has, the more problematic the situation gets. If you have a similar problem, you might want to consider consolidating your loans.

Credit Cards and Debt

Credit cards have become the de facto standard for a large number of financial transactions in the U.S. The ease of use and convenience that credit cards offer is incomparable to having to carry a large amount of bills and coins on your person whenever you have to go and make a purchase. Unfortunately, that convenience and ease of use also makes credit cards financial traps that many people have fallen into.

Credit card transactions have a way of making the cardholder forget that the transaction actually translates to debt. This debt often adds up alarmingly and, before they know it, cardholders find themselves deep in debt.

High Interest Debts and Multiple Debts

The interest rates of credit cards have been soaring these past few months. Although some cards still offer affordable and low interests, they are the exception rather than the rule nowadays.

Paying off your debt also becomes doubly hard when you owe debt to multiple lines of credit. Usually, each line of credit you have to pay off will have a different set of rules and interest rates.

Debt consolidation can answer your debt problems.

If you find yourself having to deal with large debt payments and juggling multiple debts every month, you ought to see what debt consolidation can do for you.

Basically, debt consolidation can do two things for you to make your life easier. First, it can greatly reduce your monthly debt payments. This can help you catch up with your debts without sacrificing necessary expenses. Secondly, a debt consolidation program can simplify your debt payment scheme so that you have to deal with only one or two debt payments every month.

How does it work?

Debt consolidation is basically the same as taking out a loan to pay off all your debts. You will then have to pay only the loan that you took out instead of all the debts that you previously had. This can help you in a number of ways.

Usually, the loan that you take out in a debt consolidation program will demand lesser monthly payments from you. Also, by taking out one loan to pay off all your other loans, you will now have only one loan to pay off.

Debt consolidation can be a lifesaver in this troubled economy. If you are someone who is getting hit bad with debts, you should visit a debt consolidation agency and see what they can do for you.

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.

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