It is possible that you haven't noticed anything, but who could tell what lies hidden in those lines of boilerplate attached to your credit card statements every month? More and more, vigilant consumers today are coming across artful little changes, additions and revisions inserted into their contracts without any warning. Their interest rates are a little higher, charge and fees are different, and responsible credit card usage is suddenly less worthy of reward. The terms of service that govern areas of credit card use have already been quietly changed in most regions of the country. There are other changes that still are waiting in the wings too, unfavorable terms such as fixed annual fees being an example. There are so many questionable changes that have been railroaded through: changed fee structures, changed rules to do with minimum payments, and many others.It would seem that credit card issuing companies and banks are being extraordinarily petty here; on the one hand, they have the billions in taxpayer money headed their way with the massive government bailout and the interest-free loans they get from the Federal Reserve to tide them over, and on the other hand they feel not quite obligated to help the consumer out by passing on some of these benefits. Incredibly, those who meet their credit card obligations on time are hit with interest rates that are two or three times those who lag behind. Credit card companies usually have an interest rate policy of following the prime rate prescribed by the government; the prime rate used to be over 5% a year ago, but it's only 3.25% today. Even as the prime rate prescribed by the government has fallen, actual credit card interest rates over the past year have actually risen by more than 1%.
Credit card issuers have become bloated on an out-of-control dependency on unjustified fees and charges. Credit card companies have traditionally battened on their customers with fees and charges in the area of $20 billion a year. The fee structures adopted by the credit card companies make use of many unfathomable policies. It used to be that you could transfer as much balance as you wanted, and you had to pay transfer fees that amounted to no more than $50. The $50 limit on transfer fees has been done away with now. There is a percentage of the amount transferred that you have to pay, and there is no cap that they accept. If you use your credit card to take a cash advance out of an ATM or bank, it used to be that you would pay 3% interest on it. The major banks such as the Bank of America have raised that by 2%, and they charge you an extra 1% on cash advances that you get by way of check. Using your credit card in another country has never been seen as a special activity that needed to be charged; but banks like the Bank of America have decided to milk this opportunity and imposed a 3% fee on this kind of credit card use.
Unfair fee policies are not the only way to make a sly dollar on the side though. If you have a large credit card balance outstanding, it used to be that you could get away with paying only 2% in a month that your finances were tight; not any longer: you need to pay at least 5% today. All this might at least tolerable if you had a decent spending limit on your card. But as everyone has probably read in the news, the major credit card companies are clamping down on spending limits; American Express has seen a lot of criticism here for having imposed a steep cut in the spending limits of about half of all their customers. When limits were cut in this matter, the hapless customers of some of these companies were taken by surprise; they happened to have outstanding balances at the time that they charged up trusting in the credit limits they had been advised of earlier. When the banks cut their limits suddenly, the banks had the chutzpah to hit these customers with penalties for having balances over their limits. Cardholders have also seen damage done to their credit scores when their credit card companies lowered their limits.
There are many reasons, for why the credit card companies are resorting to such penny-pinching ways now, when they have been somewhat generous in the past. The worldwide credit crunch of course is a reason, but so is the global recession that makes profitability difficult. Government regulations are expected soon to make such sneaky fees and rate changes more difficult, and this has the credit card companies spooked too. Credit card companies are rarely profitable today; wide-ranging personal bankruptcies among its customers and high default rates have pushed the companies to look for ways to shore up their revenues. But this cannot be good business policy; 90% of all credit card customers pay their balances on time. When credit card companies make changes that hit the 90% that is financially responsible, they risk severely damaging customer relations.
But if customers wish to get back at the credit card companies by withdrawing their business, they stand to lose in other ways: their credit score for example, will suffer. Customers need to carefully go through all of the literature they get from the credit card company. If they send their APR up, or if they ask for minimum payments that border on the outrageous, then certainly there may be no other option but to close.
Easy credit is no longer an American right. These changes herald a basic shift in the way America lives and does business. Consumers from now on are going to have to turn to the credit card only where cash will be difficult to use. People are not going to be able to have a constant line of credit, as the cost of that credit is going to become far more realistic than it used to be. Layaway plans and buy-now-pay-later retail methods are on their way out; if you've recently paid attention to how retail stores advertise their prices now, paying with debit cards and with cash down, seems to get more attention than the method of payment that was once king, the credit card.
Linus Orakles
http://www.authorclub.info/
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