Credit Card Companies
What are Credit Card Companies doing to your Credit Card Accounts during this recession?
*Credit Card Companies are cutting Credit Limits
If you have had a look at your statement recently you may notice that without much fanfare, your credit limit just got lowered even though you pay your bills on time. After paying all of those high interest rates and making the Credit Card company a ton of money, that's the thanks and gratitude you get for being a loyal, honest, hard working customer who pays their bills on time. Some of the "fresh" credit card companies are even cutting credit limits below your outstanding balance. Such action can actually lower your overall credit score because now you are effectively borrowing on a higher percentage of your available credit, a familiar metric used in the formula that determines your current credit score. What gives? They need to reign in lending in general because banks are still undercapitalized with questionable assets on their books. By lowering the credit limits of the good payers, they minimize the impact of overall FICO score deterioration which impacts them as a company, so the good people are being penalized in order to stop the house of cards from crumbling down. If you haven't used your card in awhile, don't be surprised to find it closed altogether.
*Credit Card Companies are Raising Interest Rates in a declining interest rate environment. Just another way for them to sock it to the good guys in order to pay for their own mismanagement and take up the slack in the way of damage to their bottom lines that increasing credit card defaults are causing.
*Credit Card Companies are doing other bad deeds such as cutting back rewards, raising penalties, making you pay down low-interest balances before high interest rate balances to earn them more money. Cutting grace periods and making you pay balances off two months in a row before not incurring interest charges. It gets better: If you happen to be late on a utility bill or something else that shows up on your credit report even if you pay your credit card on time, they can bump your interest rate up severely to up to 30% or more, or even close your account because of something they call "universal default".
So the best thing is to use the credit cards responsibly and avoid letting them get the upper hand with your account. Avoid all those fees by paying on time and staying well under your limit. Try not to carry balances but pay them off each month and take advantage of the extras that do come with the card such as various free insurances, rewards, frequent flyer miles...