April 3,2009
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News: Credit Card-Lender Tricks of the Trade.
In case anyone missed it, the "Early Show" on CBS broadcast a very informative summary of tricky standards that have become the norm in the credit card industry but are only now, being discovered by millions of hapless American credit card holders.. Speaking as a ‘Financial Contributor and guest, Vera Gibbons puts it all very concise for us all. Some of the highlights were the extremes and the timing. With an expected $100 billion worth of uncollectible (‘charge-offs'), she tells us, the credit card industry seems to be going all-out to compensate by increasing revenue from other places. Some of those ‘other places' happen to honest and abiding credit card holders like ourselves.
Vera started with credit card interest rates. Two ‘tricks' are taking place, here. One is that the rates aren't simply going up in increments. They actually double and, sometimes even triple. Since extremes like this are not what we're accustomed to, they tend to catch us off-guard. The other ‘trick' deals with timing. Right now, the credit card regulations only require the lenders to give us a two-week notice. That's only half of a billing cycle. So, we'll only get one warning and, if we don't open our monthly until time to pay the bill, the two-week period will have already passed before we even know about it. In the case of an interest hike, the damage is usually containable. We may only get socked for part of a month's interest. But, in the case of lowered credit limits, it's a different story.
In the case of lowered credit card limits, not knowing about the decrease can really hurt us. Especially, when coupled with a third ‘trick' which they're playing – lowering the limit down to the wire. By lowering our limit to only $2 to $3 over our current balance, Ms. Gibbons alerts us, even a pack of cigarettes or two candy bars, will drive us over the edge. We'll be socked with stiff penalties for over-charging. It doesn't stop there, however. After this domino falls, more of them start to follow. If we were enjoying a low interest or other promotional perk, all that can go away. So now, compounded with the penalties and loss of promo perks, we're facing high interest on a, possibly, high balance. More is to follow. With the lowered limit, we now owe more than 30% of our limit and face having our credit score whacked. Now our creditworthiness is trashed and good credit, job, insurance and apartment offers may become out of reach for us. Read those statements as soon as they arrive.