Look out! Credit cards are getting tougher and meaner

Photo by Medill Money Mavens

What's arising inside the minds of charge card companies now that the charge card reform act is descending on us? A client service supervisor for a major credit card company emailed us to present to us the low-down: decreased grace periods, thinning lines of credit, increased fees on balance transfers, and, naturally, over-inflated APRs. Here's the details:

REDUCED GRACE PERIODS If you've a 25 or 28 day grace period, banks are going to shrink their grace period to the new minimal, 21 days.

CUTTING CREDIT LINES Credit card companies are reexamining account statements for debt-to-income ratio, and lowering lines of credit. "Lets say you owe 40k in debt, and your last reported family income is 60k. Well, if you already owe 40k, and you only clear 50k, how are you ever going to pay that back? So the bank is omitting the line because they do not sense they will ever get paid back if they give it to you. You cant default on another 10k if they don't let you have it in the first place."

DIVY ON BALANCE TRANSFERS Anticipate the fee for transfering balance from one charge plate to an additional one to increase to 5% from 3%

INCREASED MINIMUM PAYMENTS This is a component of the CARD act (http://consumerist.com/tag/card-act/), I think, and will actually help some people liquidate their loans quicker.

APR INCREASES This is the worst one. All the big issuers are conjuring up higer rates. The new polices don't take effect until February 2010, so the banks are acquiring in all the rate increases they can. The new law determines when an APR can be changed, and requires it deceases after 6 months of on time payments. So the banks are putting their rate hikes in immediately, so your new 'steady' rate, is the old 'default' rate. It used to be you had a rate of around 10%, and if you were late you went up to 20%. or more. Just about anyone studying this probably have had their rate increased to someplace roughly about 20% now."

You can fight back and it's not rocket science: Pay ALL OF YOUR BALANCES off asap and, cut the cards up and mail them back to the issuer therefore sending them a powerful consumer message. Better yet only make a small charge once a year to keep the account open and not take a hit on your credit score. (This works only if you're the disiplined type) Only use your credit cards if you can afford to pay them in full during the grace period! This is no game, and your very life, and peace of mind is at stake here.

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