It takes a magnifying glass to read the fine print on the pamphlet that comes with your credit card bill every month. But that is what exactly what you should do: read it.
What you will find in that pamphlet is a doubling of interest rates, increases in minimum monthly payments, and a reduction in credit limits for even those borrowers who have good credit. One such credit card company J.P. Morgan Chase has imposed a $10 monthly service fee which has angered their customers.
Also increasing are late fees, minimum finance charges, late payment fees, over the credit line fees. The fee increases that have started to show up recently have raised consumer anger even more with all of the financial pressure that consumers are feeling right now. This is all very disheartening for credit card customers but even more discouraging is the fact that customers who try to cancel their cards may take a hit on their credit rating as well.
In previous years these blanket charges were normally just reserved for customers who have poor credit. But beginning last year some credit card company started making these changes to see if people would accept them. Even though in December 2008 the Federal Reserve passed stricter rules on when and how credit card companies can change the terms of agreements with customers those rules do not take effect until July 1, 2010.
In February of 2009 the Senate Committee on Banking, Housing and Urban Affairs heard testimony on credit card practices. The credit card accountability responsibility and disclosure act was introduced which would clamp down on any time, anywhere interest rate hikes, limit fees and penalties.
According to Greg McBride Senior financial analyst for www.bankrate.com the credit card changes reflect a business cycle. When the economy is bad, card issuers go on the defense and look to limit their exposure to losses as unemployment and defaults of both climb. Other analysts state that since we are in a recession credit card issuers are just reacting to broader economic forces that are at work and taking steps to minimize the risks.
Now it is apparent that people are being squeezed on two fronts: not only from falling home values and the mortgage crisis but also from rising unemployment. On top of this the cost of using credit cards is increasing as well. This is problematic since consumers are using their credit cards to pay for such basic purchases as gasoline and food in order to survive financially. The bottom line is that these people will be falling further and further into debt at a much quicker pace. This argument is bolstered by the sheer numbers of people who are entering credit counseling for financial difficulties in the past 12 months. The cause of all of this is that the credit card companies oversold their product and they are now unable to bundle that debt and sell it to investors like in the past. Further proof of this is in the fact that some card issuing banks have requested federal bailout money because of their weakened balance sheets.
What all of this means is that as a credit card holder you need to do more than ever before to adhere to the terms of your credit card agreements. If you find that the terms have been changed on your credit card statement in small print contact the card issuer right away. While you may not have success in changing things back to the way they were you will at least be able to make your opinions known concerning their practices.
Finally, be aware that your credit rating might take a hit if you cancel your card. The best thing to do in this situation is to pay your card off and keep the balance at zero. This will help keep your credit rating intact.