So Much for Being a Good Customerby Tim Manni
We all know the swift and severe penalties credit card companies can place on delinquent customers. Now, even being a responsible customer won’t save you from feeling the effects of the credit card companies’ latest restrictions.
Despite paying their bills on time each month, many responsible cardholders are experiencing rate increases and cuts to their credit line, as well as being declined when they apply for additional cards.
Credit card companies say they have no choice. They must protect themselves against the number of customers who have either lost their job, or have had to scale back their payments due to the ongoing recession:
“So account changes like this are necessary for us to appropriately account for the increased risk of lending in an economic downturn, since these are unsecured loans,” she [Pam Girardo, a spokeswoman for Capital One] said.
An unsecured loan means there’s no house, car, boat or other thing a credit card company can quickly grab if a customer doesn’t pay up.
“Consumers should know exactly what they’re getting into when they sign up for a credit card — you agree to let the card company change your rules at any time,” said HSH Vice President Keith Gumbinger. It’s unfortunate, but in today’s society, credits cards are a necessary evil.”
Aware of the “unfair” credit card practices, lawmakers approved five significant changes to the way credit-card companies bill and charge cardholders (click here for a summary of each rule). “The rule will enhance public confidence in financial institutions and establish a level playing field for institutions that want to do business fairly without suffering competitive disadvantages,” said OTS Director John Reich. These five changes won’t go into effect until July 2010.
But critics of the changes say the new rules won’t help consumers the way they think they will:
“The rules will reduce credit availability and increase the price of credit,” said Kenneth Clayton of the American Bankers Association…
How should cardholders handle the increased restrictions? First, do your best to pay off your monthly balance on time. If you’re still subjected to the “unfair” regulations, some credit experts advise that you “Get the cards out of your wallet. Don’t use them.“