Posted on 11/24/2008 6:47:21 AM PST by TigerLikesRooster
Credit crunch for consumers
As card issuers hike rates, consumers forced to work harder to protect credit
By Andrea Coombes, MarketWatch
Last update: 1:36 p.m. EST Nov. 23, 2008
SAN FRANCISCO (MarketWatch) -- As credit-card issuers raise rates and fees and lower credit limits, consumers face higher-cost debt -- and more work maintaining their credit score.
In some cases, banks' former darlings -- consumers who paid consistently and on time but let their balances ride -- now are being hit hardest, asked to stomach higher interest rates and fees or try their luck with different card issuers.
For instance, some J.P. Morgan Chase & Co. (JPM JPMorgan Chase & Co) credit-card customers who have carried a balance for more than two years will be charged a $10 monthly fee starting in January and their minimum payment will rise to 5% from 2%.
Meanwhile, as many as 10 million Citigroup Inc. (C Citigroup, Inc) customers whose interest rates have not changed in two to three years will receive notice in their November statement that their interest rate is increasing by an average of three percentage points.
And in December, American Express Co. (AXP American Express Company) will lob a two to three percentage point interest-rate hike across a broad swath of consumers, plus increase the conversion rate for charges made in foreign countries.
Amid rising unemployment and higher delinquency rates, credit-card issuers are cracking down, particularly on the balance-carriers. "Given the current environment banks are starting to get very scared of the backlog of debt they're owed from their current borrowers who have carried balances," said Greg Larkin, a New York-based senior analyst with Innovest Strategic Value Advisors.
(Excerpt) Read more at marketwatch.com ...
Ping!
Feh. The card companies will be lining up for a bailout soon enough.
Lehman, Merrill Lynch, AIG would be forgotten. Visa, MasterCard, American Express would be on the headline everyday.
In the background, derivatives would keep blowing up.
They did this,via George Bush in 2005,and look where that got them.Via the “bankruptcy Abuse and Prevention Act”,minimums were increased from 1% to 2%.Increasing it to 5% will kill consumption.
Wow. This is a surefire way to kill the little guy. I know plenty of people who fall into this category.
Damned if you do and damned if you don't!
It’s also the “little business” that will get killed.Many use a credit card for expenses.
That "broad swath" includes people who never carried a balance. Ever.
Assuming you lock in the old rate by doing so, and make payments on time, I see that credit card companies will just lose that higher rate.
Or for those lucky enough, how will it hurt to pay off the balance and close the account, tell them to shove their higher fees?
What am I missing?
I guess the "culture" still does not get it.
I guess this is what they mean by “income redistribution” - except poorer people don’t get any, only those who got us in the mess we’re in now.
Bambi lies, people cried.
Something astonishing happened to me last Friday that never happened before in my entire lifetime.
I got a letter from a bank card company saying that since I haven’t used my card in over 24 months, they were closing my account.
Usually, on cards I don’t regularly use I get balance transfer checks (with low or no interest) in the mail each month instead of bills. Come to think of it I haven’t seen any of those in the past two months, either.
This is necessary for the banks to clean up their balance sheets, but is going to kill consumption (as if it isn’t killed already...)
By lowering the total amount of credit available to you. One of the key factors in determining your score is the ratio between how much you have used and how much is available to you. i.e., your combined credit line. The lower this ratio (the less credit you have used up) the higher the score. Also, if the account is an old one (a few years or so), it will lower the average length of all your accounts. The longer the average, the higher the score.
Increasing the minimum payments and interest rates in 2005 pushed many debtors into bankruptcy. I don't see how making them even higher is going to help.
That would be the FICO score, right? I can’t ever figure that out. They issue credit based on a score that doesn’t take into account my salary, length of employment, or debt to income ratio.
It’s going to kill(even more so)the housing industry and car industry.Taking away money that could have been used to pay a mortgage or car loan,will be a disaster.
Until you want to get a mortgage. Good luck doing that with no credit history.
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