Posted on 08/28/2009 10:23:19 PM PDT by rabscuttle385
NEW YORK (Reuters) - Millions of Americans have already seen their credit card limits shrink, and millions more face the same fate as lenders prepare for tougher U.S. consumer protection rules.
Since the financial crisis deepened a year ago, credit card companies have been closing millions of inactive accounts, cutting credit limits and raising interest rates to cushion themselves from record loan losses.
This is just the beginning of the biggest shake-up in the credit card industry in at least 20 years, analysts said.
. . . . .
Going forward, credit card companies will purge customers rather than risk higher losses. Sakhrani said customers likely to be cut off are subprime borrowers with weak credit and those who switch lenders, lured by "teaser" rates.
. . . . .
...a new law signed recently by President Barack Obama forces credit card companies to warn customers about changes in contractual conditions.
Starting in February, lenders will face even more restrictions on imposing fees and raising interest rates. Unable to ramp up these sources of revenue, issuers worried about losses are expected to cut back on lending.
"If you have customers lower down the credit spectrum you routinely repriced and you can't do that anymore, you may see card issuers decide that they don't want to extend lines to them anymore," Sakhrani said.
Credit card companies also anticipate they will raise fees and rates before the new law takes effect.
(Excerpt) Read more at reuters.com ...
Green shoots of recovery...yeah, right. *snicker*
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Anyone who is carrying debt on credit cards is in for a nightmare (among other nightmares). They keep raising the rate on carried balances. If you don’t pay off the balance or cancel the card, you can’t stop the constant rate increases and the increasing monthly payments. At some point you cross over into the situation where your income can’t make the payments and you are insolvent. Just like the Federal government! Only YOU don;t have taxing and borrowing authority!
No self-rigtcheos commentry from me. I agree with you. I thank you, in fact.
Americans used to be the thriftiest of people, and debt was considered a bad thing. We should get back to that, at least a little, then we could start electing politicians who believe the same thing and the government would start living within its means, at least a little.
The rate on one of my cards has been hiked twice since Obama was sworn in to the point where the rate is triple what it originally was. In fact, I received two rate hike notices this week...and am so infuriated that I am not only intending to close the two cards in question but every single card I have (and all but one of my balances are of the single-digit rate variety). I have never gone overlimit, and I have never missed a payment...ever.
This is it. I have had it with these damn banks.
I'm paying them off under the existing terms and then going cash, check, and (maybe) debit only.
Obama’s actions are like the Midas Touch, except, everything Obama touches turns to shit.
I won't disagree, but the banks aren't just trimming away dead wood now. They are actively attacking anything and everything they can, including customers who are playing by the rules. In other words, they've swung to the other extreme: rather than giving away credit cards willy-nilly, as in the past few years, they're clamping down to the extreme.
I’m seeing the same thing this week. A jump from 13.5% to 21.6% on our business card. We do the automatic withdrawal thing so payments are ALWAYS on time. We just paid off the balance and put the card in the drawer. We are pay as you go, now. Debit card for most purchases. Which, of course, means GDP takes another hit. A small hit. But, a hit.
Sheesh.
The rate hike notices I received specifically noted that they are due to "new federal laws and regulations." In other words...thanks a lot, Obama.
Never mind the fact that I'm already paying taxes to subsidize the big banks' bailouts (and the big banks are the ones controlling the credit card issuance market).
“Spare me the self-righteous commentary, will y’all?”
Hell no!
Live on credit, lose everything you have and there will be no sympathy from me!
What?
Then they wonder why consumer confidence is falling. Nobody feels like spending money on anything anymore. Its just not fun...
OK! I have no CC debt.
That request was more-or-less intended for you, but hey, you’re entitled to your own opinion.
Good for you. I've been doing that for years. I have one credit card with a $2,500 limit that is strictly for emergencies. It currently has a -$1.00 credit balance.
Gee, maybe they'll cancel my card 'cause I never use it :-)
This pendulum effect is not unusual.
Think about this: I have close to $100,000 in open credit right now, and I could easily double that by applying for more credit cards. Why should a simple person like me have so much credit? It points to excess liquidity and easy credit, and those are not good things. There is no problem for creditworthy borrowers and there will not be a problem.
We mustn't think of credit as some kind of right. It is serious business and both the borrower and the lender and society as a whole are hurt when it's too promiscuous, as it has been.
To repeat, there isn't a problem with excessively tight credit nor will there be for people with good credit history. Anyway, we should live within our means and not think of credit as a form of income, which many people do.
I dispise people that carry a balance on their credit card and then bitch about the rate the bank charges.
If they don’t have the money in the bank they have don’t have the smarts to have let alone use a credit card.
No, it's not.
Working to pay for the bailouts that the U.S. household was forced to give to the big banks on preferential terms, only to have the same banks turn around and lend back to them at usurious rates and under decidedly less friendly terms, is never fun.
That is a very large credit line. I would make sure I have sufficient protection against I.D. theft as well.
Don’t feel too bad. They borrowed most of it from the Chinese. So... you’ll have a lifetime to pay it off!
It's also cat and mouse when they borrow from you.
Keep one CC with say a 5K limit and zero balance for emergencies or renting a car or buying an airplane ticket. It used to be that only Budget would take debit cards for rentals and even then with a debit card the request for approval would lock up the full rental price and then “paying” for the rental would then debit the card so for a while you needed twice the rental amount. Used to be the same way for airline tickets. Anyone? ;-)
Or, at least, a bulldozer!
The banks would consider you a deadbeat.
You aren't making them any fee or interest income.
In this kind of lending environment, your card would be one of the first to get closed.
Either borrow, so the banks can jack your interest rate into the 30-40 percent range and keep you on a treadmill for life, or don't deal with them period. The game is clearly stacked against the individual and household.
I’ll close ‘em all early next week and freeze the rates in the single digits. If I decide to get another credit card in the future, it’s gonna be one issued by my credit union.
rab - and I was not disappointed, either. ;-)
I think he means $100K across all his credit lines, not just on one card or LOC.
Credit unions and coops and trade groups can offer better terms. Avoid the big bank cards like the plague...
Hey rab - If you have “old” cards and close them, you’ll lower your FICO due to the overall loss of age on your credit file. Better to keep them at zero, buy some socks every few months, pay it off the day the statement cuts, and let them simmer. Also, if credit’s going to be harder to get in the future, you’re doing yourself a bit of a favor keeping the older cards ... just in case. You just don’t have to use them.
In the meantime, yes, get a good CU card.
I don’t have that option. They all have balances. However, I only have definite rate hikes on only two, so I could close just the two for now.
It’s a tricky maneuver. I’m going to have to think for a few days about how to properly execute it.
rabscuttle385 The rate hike notices I received specifically noted that they are due to "new federal laws and regulations."
Don't forget the vicious cycle where the companies reduce your credit limit which, in turn, reduces your credit-to-debt ratio, thereby reducing your credit score, causing your other creditors to also raise your rates and/or lower your limits.
I kind of wonder, if the credit market really gets so bad, will bad credit really matter? Ultimately, the credit companies are still going to need customers; they may wind-up reducing the ratings of so many borrowers that 500 may be the next "Good Credit" standard.
Guess you did not qualify for credit - heh... Sorry, could not resist...
Credit cards, cash, whatever, it doesn’t matter to me for the present time. I don’t like it, as there are many things that I would like to purchase. I would like to buy a new Airstream trailer, but I won’t right now.
Other than necessities, I refuse to buy a damn thing, until those crooked dems and Obama are out of power.
We normally take a 30 day vacation each year and travel. This year we simply stayed at home... to hell with Obama and those jacka$$es in DC, I’m not going to play their game.
I have no idea where my max line is. I seldom use it. Maybe a car or hotel from time to time.
For the record I probably have 5 including 2 AMEX’s. The problem they have with me is I really don’t use them. I am one cheap bastard that was in the negative just 6 years ago. I learned my lesson. God set me straight.
Heh...good for you! I was talking a bit tongue in cheek...heh. You do set a good example though...
I know you were. I’m just proud of my beans and rice life that I’m capable of. It is truly a journey of discipline. :^)
The thing is that Bush/Obama is depending on consumers to get the economy going. The have bet the house on it.
Oopps.
We’re in the best of hands.
YES! That's where the big problem is. If your card is tied to companies that got the bailouts, they are doing every trick in the book to get the money to pay back the bailout.
Even by jacking up your rates, they know they are going to piss people off but many will just pay up and close the account - which is what they want! They want you to pay up so they can eventually pay back the money on the bailout.
I've noticed that smaller, healthier banks aren't having such a problem - unless their line of credit flows through one of the bigger banks like Citibank. If your payment history is excellent and your credit score is solid, the healthier banks still want you as a customer and are willing to offer a competitive rate to have you.
For anyone who needs a quick way to get out of the credit card spiral, check about borrowing money against your 401K. With mine, I can borrow up to half my balance and I am ultimately paying it back to myself so the rate never changes and it can often be deducted from your paycheck automatically. The interest rates are lower than most credit card rates so you limit your risk. The only danger is getting fired or laid off because you still have to pay the loan back.
I could not agree with you more. Those that whine about the BIG CREDIT CARD COMPANIES need to get a life and understand no one forces them to use the damn card nor are they entitled to the things they buy with the card. pay it off monthly and there is absolutely no problems. If you cannot pay it off in a month then pay it off in 2 but if you are going to make minimum pmnts then expect to get hosed. Just don’t cry about it and blame the CC company, because they don’t owe you a thing.
As I said, the card is for emergencies only. If they cancel it, fine with me. I can just as easily keep cash (folding money) on hand for emergencies. But the card is more convenient, size wise if nothing else.
My philosophy is that credit should only be used for the big things in life. Such as your house. And maybe a used car.
Pay cash for everything else. If you don't have the cash for something you want, show some maturity and responsibility and save for it.
I got a letter from Citi bank about my Sears Card. They said there will be special 0% interest financing on selected stuff.
I guess sears is going to sell appliances at 0% interest if the charge is on the SEARS card.
Good for you. You are imposing limits on yourself to assure that you spend within your means. Paying carrying charges means paying money for nothing other than the privilege of borrowing it. There are cheaper ways to get money than to borrow it from the credit card companies.
The problem will be for those people that don't understand these very simple propositions.
Big Brother Obama will try to find ways to coerce these companies to continue lending to the irresponsible while punishing the responsible.
Excellent point. However since cheap credit, including mortgages for people who never really qualified in the first place, is a substantial part of what got us into this mess, how do they figure that cheap credit will get us out of it?
That usually means securing the loan with some form of collateral unless you plan to make a withdraw with a gun..
Which forces you to have "more skin in the game".
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