As more and more banks and credit card companies implement drastic changes to their credit policies, Americans are getting edgier. Many card issuers are raising rates, fees, charges, and cutting back on reward programs. The sudden change in attitude has left many cardholders at a loss on how to deal with higher monthly payments.
With unemployment expected to reach the 10-percent mark by early next year, banks are gearing up to see more delinquencies and late payments. Card companies are also getting worried about the upcoming February implementation of a new law featuring tougher restrictions on the credit industry.
Industry analysts say that even cardholders who pay their monthly minimum faithfully can face sudden increases because of the card issuers' change in strategy.
One of those responsible consumers is Martha Petersen. A model mother and diligent housewife, Petersen has carefully managed their family's expenses and budget. She says that they have never failed to settle their monthly minimum. At present, Petersen allots $340 for their credit card dues.
Last month, however, Petersen received official communication from their card company, informing them of an increase in their interest rate. What used to be a very comfortable two percent rate has now ballooned to five percent. As a result, Petersen now has to come up with $850 each month for their monthly minimum.
Ann Marie Bagley, a friend of Petersen, says that she and her husband are also feeling the squeeze from banks even though they have always paid their monthly dues on time.
In 2003, the couple took out a loan to start their own business, a staffing agency. Bagley says that their business took off and showed signs of progress until two of their lenders closed down their credit limits. The husband and wife team says that their banks have closed down several of their accounts, leaving them with only $64,000 in credit lines.
Faced with the drastic cuts and increasing operations costs, the Bagleys are afraid that they may have to close shop. Ann worries that despite their excellent credit ratings, the sudden cut of their credit lines could affect their credit histories, making it harder for them to take out future loans.
Out of desperation, Ann's husband has returned to school to earn his real estate license. The couples are optimistic that the housing industry will rebound after the recession. For now, the two live off the remaining amount from their 401K and consultant fees.