Banks Respond to CARD Act with Tougher Terms

In recent months, credit cardholders with good credit histories have found their rates climbing and their lines of credit reduced. Issuers have either remained silent, or claimed that this is just a standard procedure.

But there is nothing standard about rates soaring anywhere from 5 to 30 percentage points for consumers with good, even perfect credit.

Why should this happen? For one, the Credit CARD Act has gone into effect and limited many of the predatory practices lenders would impose on deeply indebted borrowers. These include raising rates without notification, and rate increases on existing balances— basically, ways to create trapping mountains of debt.

Under a better (as in growing) economy, the credit card companies could absorb their losses from the Act through increased consumer spending, which would generate more debt overall.

However— the Great Recession has encouraged consumers of all credit histories to curtail their spending. That creates less debt, which means less income for the card issuers.

So MasterCard and Visa and the rest have a choice: either cut back their growth projections and find new ways of generating revenue, or squeeze every penny out of their existing customers, even the ones who’ve been consistently paying along.

Guess which plan they opted for.

After decades of rewards incentives, the credit card companies are now “rewarding” their customers with changes like:

  • Bank of America’s annual fees of $30 per account.
  • Citibank’s “rebates” on increased rates, if the account holder spends a minimum per month.
  • HSBC ‘s lowering of credit limits for residents of California, Arizona, Nevada, and Florida (Why? Because those states are struggling economically.)

How do you avoid this? Since credit history is apparently no longer a criterion for a decent line of credit, a cardholder should compare their account with cards offered by different issuers. In some cases, it would be better to switch.

A warning. Closing accounts will affect your credit score, regardless of your line of credit or the amount of debt you’ve incurred.

To minimize negative action, you should pay off your debt before you close it.

Alexander Carl

Alexander Carl

I find it difficult to brag about myself. Too modest? Perhaps.

Anyway: my name is Alexander Carl. I am a recent graduate of the University of North Carolina at Chapel Hill, where I spent four blissful years earning a degree in Communication Studies. Now I face the real world of economic downturns, student loans, and the absence of “academic” camaraderie.

Yet I refuse to be bummed. My economic philosophy is to live simply, save, and maximize whatever I can. Consumer culture is undeniably pervasive, but you don’t have to sell your soul to co-exist with it— there is great power from using your economic resources wisely.

I started writing when I figured out how to hold a pencil. Since then I’ve written short stories, poetry, screenplays, and have blogged. In fact, three of my screenplays have been produced into short films, two of which I directed. I’m no stranger to the media, having served as a DJ at a freeform radio station and worked as a crew member for live TV.

Pastimes include traveling (I’ll visit virtually anywhere), swimming, jogging, hiking, and hunkering down with a good movie.

Overall I’m a peaceful person, though not in a creepy New Agey way. I get my energy from music, good conversation, and the outdoors (I was an active Boy Scout, earning my Eagle). I consider myself “inquisitive” and “wry”, and for the sake of autobiography I’ll assume that I am.
Alexander Carl

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