Credit faucet turned off (interview of Emily Peters

When it comes to credit cards, what you see isn't necessarily what you get. That's because interest rates, fees and other cardholder terms can change unexpectedly. At a glance Name: Emily Peters Hometown: San Luis Obispo, Calif. Education: University of the Pacific (bachelor's) Career highlights: Worked for several years as an industry insider at credit report bureau TransUnion. Joined Credit.com in 2005 as a personal finance expert. Seven years of experience in the credit industry focusing on credit reports, credit cards, loans and personal finance. Serves as the CreditBloggers.com editor and has spoken at numerous personal finance conferences. Commentator on FOX News, CNBC, KRON-4 and Fox Business News. Quoted as a national credit expert in USA Today, American Banker, Kiplinger's Personal Finance, Newsweek and the Los Angeles Times.

Change can be a positive force under the right conditions. But as the credit card industry tries to shield itself from risk in a shaky economy, new tactics for bolstering balance sheets may end up hurting good customers along with the bad ones, according to Emily Peters, a personal finance expert at San Francisco-based Credit.com, a consumer advocate and educator.

I hope to hear from freepers who have had recent changes with their credit cards. I have two cards with banks that got money from the government. One lowered my interest rate by 4 percent, the other raised the interest rate by 4.24. Another bank that I think did not receive government money raised it by 6.00 percent.

You have the option to accept and keep the card, or refuse, keep the old interest rate, and the card expires on the expiration date.

Some of the other possible changes haven't happened yet, but this year isn't over yet. (Lowering of credit limit.) As far as I know I have not got a risk factor but do have a good history with them.

One bank with an increase blamed it on the economy and mortgage loan crisis [6.00 percent increase] and one that received government money [4.24 percent increase] blamed it on the federal government, the fed and their money policies.

Any comments to enlighten? Any experiences of your own? Anyone who knows more about the industry than I do?

As our business grew and as our ability to purchase more and a wider variety of product, we changed from a distributor-style operation to more of a stocking distributorship, to a hybrid of the two, which is common today in small business - private labeled products by established manufacturers that we kept in stock for immediate shipment.

We also increased the amount of products we bought, in order to lower our cost of goods and to be able to ship immediately to end users that required quick supply of our disposable products that are used by them while employing our equipment.

That change required more operating capital.

When the banks were bailed out by the TARP program, started by the Bush administration and the Fed (ostensibly to relieve the system from the stress created by toxic assets and give the new administration time to regroup and form a strategy) we the people were told it would address the damage created by the horrific practice, encouraged by the Fed, of low income, undocumented loans mixed with solid asset based securities and loans.

This Toxic Asset Relief Program (TARP) was supposed to help credit flow from the banks to the consumer. But a funny thing happened in both the old and the new administrations - they did not demand an accounting nor was there any oversight to assure the program would function in the manner in which they were intended.

The failure of House and Senate, the Fed and the Administration gave the banks free reign to use the money in the manner in which they best saw fit.

They saw fit to rape the public.

The banks made use of TARP funds, as we all now understand, to bolster their own balance sheets and allow them time to creatively acquire each other, thin the heard and create new and inventive ways to soak their customers and fleece the unsuspecting public, both individual and commercial accounts, which they did, while the new administration tried desperately to blame the previous administration.

Without adequate oversight, the banks took steps to make up shortfalls in their own balance sheets, which leads back to the decimation of small business, the true lifeblood of the American economy. Like many households (including yours, most likely) small business credit lines have been slashed at the same time rates have been increased.

The net result of these tactics has left many with a credit profile that used to show them as, to use round numbers; a debtor with a $150,000 credit line with $80,000 unused, at 9 or 10% to a debtor with a $90,000 credit line with $10,000 unused at as much as 24-30%.

Do the math. It adds up to an instant credit rating loss of devastating consequence; debt to income and debt to available credit ratios changed dramatically, lowering the corporate credit report by many points. Result? No new chance of increasing funds for operating capital and an operating increase of 20% overnight.

The effect of the restricted ability to raise capital means that many companies no longer have the ability to make up the shortfall between the credit lines available in 2008; the 2009 credit lines are not enough to expand and not enough, with the new credit rating, to maintain previous levels of support.

Unlike Mr. Obama, companies are not able to print more cash. No cash for operating expenses means something has to go, cuts need to be made and they can not afford to continue expansion plans upon which they may have spent thousands of dollars and untold hours.

The world, in effect, has been turned upside down in about ten weeks.

I say ten weeks because that is when the very same set of circumstances began to spread throughout small businesses around the country. Companies and lessees of warehouse and office space who may have contracted for additional space to implement growth plans have literally gone from boom to bust and had to give up the space, leaving commercial renters holding the bag. The commercial real estate markets will soon be hit by massive defaults; which will in turn lead to appeals for more bailouts, financing for commercial real estate projects has slowed to a trickle and a huge supply of commercial loans, coming due for refinancing, will add to stress on banks and other lenders. Rents will soar on already struggling small businesses.

Where will we be in ten weeks? Ten weeks after that?

I can say this with absolute certainty; if we do not get their attention in Washington DC, forcefully and with a mighty show of resolve, we may not be able to avoid the tidal wave of deflation and the tsunami of inflation that will surely follow.

It is important to keep the focus on what has happened and in a very short time frame. It illustrates why we must act immediately to stop this insane doubling down of deficit spending, reckless growth of bureaucracy, rush to a dangerous combination of Nationalist and Marxist rule and the dire consequence if we do not stop it dead in its tracks and stop it now.

I had two cards, both platinum level, one from CITI and one from Chase. Both had $25K limits on them with single-digit interest rates. both cards had zero balances.I looked at the CITI statement (after using the card for a $2K purchase) last month and found my interest rate was now 15.9%. I called and asked why and they said it was random and cited the state of the economy, etc.

I told them that was BS and would consider cancelling the card. They offered me a new card, diamond level, at zero interest and zero balance transfer until March of next year and 9% thereafter. I asked them why not just lower the platinum back to where it was and save us all time and paperwork. They said it didn’t work that way. Take it or leave it. Sheesh, what a hassle. When the diamond card arrived, I transfered the 15.9% platinum balance to the zero balance of the new card. It saved them nothing. In fact, it cost them 9% (APR on the older card).

I also noticed that the cash advance APR was through the roof. You are typically eligible for 10-20% of you total limit in cash advance. The interest rate on the advance was 29.6%. Won’t be going there. And, it gets paid off last. They reserve the right to pay off the lower interest charges first (regardless of the age of the charge). So the cash advance stays out there racking up interest payments while all your 0% stuff is paid first.

The coup de grace was when (in the same conversation) they told me that I no longer had $25K per card but $25K total between them. I was then asked to weight the cards and that would be the limits for the foreseeable future. So basically, they cut my credit in half.

FWIW, I have had CITI cards for over 25 yrs and have an 800+ credit score. I pity the poor person whose score hovers around 600 or so.

I wonder if the administration’s new regs change any of the BS I just had to go through?

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