With all the talk recently about credit card reform maybe you’ve been wondering why we need credit card reform in the first place. Well, OK. Maybe not. Chances are you’ve had your own run-in with these credit card pitfalls from SmartMoney.com
“Thanks to the credit crunch and a growing number of defaults, card issuers are coming down hard on borrowers. “
No doubt. Things weren’t exactly friendly with most credit card issuers and card holders before the crunch. Just check out the list of punitive tactics available to them:
Punish you for behavior that might increase your risk of default.
Activities like having “too many” credit cards or “too many” inquiries on your credit report or a drop in your credit score may be cause enough to raise your rate. Some card companies have said that a “perceived customer risk” could cause them to reduce a cardholder’s limits.
Make YOU pay for THEIR problems.
Some issues raise your rates to compensate for problems with their own finances. That’s right, if there’s lower profits, you could be facing higher rates.
Penalize you heavily for a single mistake – any mistake.
This is where they can raise your interest rate on your credit card because you were 15 days late on your car loan, or were overdrawn on your bank account.
Reduce your credit limit.
Some issuer actually lower your credit limit as you pay down your debt. This makes a kind of sense. After all, if you’ve proven yourself to be irresponsible with credit, a lower limit will lessen the amount of financial damage you can do to yourself. However, it also lowers your credit score. lowering the limit, increases the ratio of current to available debt and makes it look like your close to max-ing out your card even though you’re actually paying it down!
They have a long memory.
A mistake can take a day to make, but it will take forever to forgive. One late payment can trigger rates of almost 30% and many issuers require 6-12 months of on-time payments before the rate will come back down to earth.
I have to say that I have a Citibank card and have never had a problem with them. I’m actually quite surprised, to be honest. I did have one payment get delayed and I got hit with a rate increase AND a late penalty. When I called customer service and explained the problem (and pointed out my payment was 1 business day late), they reversed the late charge and immediately reduced my rate. This shocked me because I never carry a balance, so Citibank never makes a dime of interest off me yet they still rolled back the charges. I’ve had problems with other credit card companies (who shall remain nameless), and because of this I simple do not use the card.
However, if you have not been so lucky and have had some credit problems in the past, you might want to check out 5 ways to improve your credit score to get back on track.
Quicksand photo by publicenergy
Popular Posts