credit card problems


Credit Card Crisis - Have YOUR Credit Terms Changed?

Complaints of predatory credit card lending practices have been heard for several years.  As the economy has worsened legislation has been proposed that would limit changes credit issuers are allowed to make on customers existing accounts.  An unforeseen result of the new law is an avalanche of changes being made to existing credit accounts by financial institutions.  These lenders are changing account terms now to maximize profits in case the law is passed and to limit their risk exposure in the current bad economy.  Continued below...

Predatory lending is now business as usual with even the most credit worthy customers affected.  These practices are escalating rapidly with no end in sight and no law to stop it.  Consumers with good credit who received countless offers of more credit and higher limits for years – are now considered a liability by these large lenders.

20% (one in five!) of consumer credit card accounts have been modified by issuers in the past 3 months.  Fees have been raised to ridiculous levels, the time between statement and due date has shortened to days and due dates often change monthly; interest rates are being raised as high as 30%, and credit lines are being adjusted downward with little warning and no explanation.

Consumers who fail to monitor their credit accounts may find their financial situation badly damaged through no fault of their own.

Because of the way the credit market works, a bank issuing a mortgage or loan  looks at what percentage of debt you carry versus the amount of credit available to you.  Credit reporting bureaus also consider this number when assigning a rating indicating creditworthiness.   For years economist have recommend using no more than 60% of the credit line on revolving charge accounts. (continued below)

Good advice - but if your limit is drastically reduced, the percentage is out the window.  If you have a balance of $2600 on a card with a limit of $6000 most lenders would see that as responsible use of credit.  If your limit is reduced to $2800 it gives the impression of a consumer who may be at risk of default.  The pace of credit line deductions is escalating weekly – and, for now, consumers are on their own when it comes to protecting themselves from predatory lending.