November 25, 2008
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News: Card Crunch: What to expect; What to do.
What to expect: Sweeping changes in the credit card industry have already begun. This is probably just the beginning, so adjusting to these changes quickly may be efficacious in dealing further changes yet to come. Many credit card holders will be able to avert the stronger measures which follow. Knowing the early changes may provide the tools to overcome them and avoid the more extreme in the future. From the biggies, expect this soon:
- JP Morgan/Chase: $10 monthly fee for those carrying balances more than two years. Higher minimum monthly payments, going from 2 percent up to 5 percent.
- Citigroup: Interest rate hikes averaging 3 percent for credit card accounts which have not seen a hike in two years or more (about 10 million card holders affected).
- American Express: Interest rate hikes from 2 – 3%, applying to a broad range of card holders. Foreign exchange rates will also adjust unfavorably for the consumer.
- In general: The other card lenders, both large and small, are almost certain to follow the leads of these early initiatives. Bank of America, for example, is our nation's largest bank and second-largest credit card lender. Because they have taken a leaner approach, they seem to be in a little better shape financially. However, they are also reporting heavy losses from their card lending branch… perhaps the worst default rate they've ever experienced. Expect them and most of the other lenders to follow similar practices to their counter-parts.
What to do: Because these changes are so new and still experimental, the industry will be a little while in settling into a new norm. So right now, there are many options for those tuning in to the ‘credit card weather report'. These are immediate suggestions:
- JP Morgan/Chase: Bring your total balance to zero before the two-year mark hits. Prepare to pay a higher minimum monthly payments and, in fact, pay $1.00 more than that. These are actually healthy practices and will, ultimately, benefit the consumer even more than they would normally benefit the bank itself.
- Citigroup: Lower your debt balance. Seek out new opportunities while the Prime is still low. Even from Citi, you may find an undiscovered promotional credit card with much lower interest. Call Customer Service and see what you can negotiate, you may be pleasantly surprised. Remember, you can always opt-out (More on this in a future article).
- American Express: Same advice as for Citigroup, above. Compare international conversion table rates to those of other card lenders. Consider carrying VISA or MC alternate (they are also much more widely accepted).
- In general: Same advice as for Citigroup, above.