The looming credit industry regulations are unexpectedly speeding up how card companies are introducing changes to the credit field. With the tougher regulations set to take effect next year, and the economic crunch still taking its toll on millions of Americans, not to mention large corporations, many card issuers are resorting to harried methods to minimize losses. These practices, while regulated by the government, can still wreak havoc on the cardholders' credit scores and ratings.
Credit card debts have also risen to historic heights in recent months as the brunt of the economic crisis is felt by millions of cardholders. Increasing card debts is also causing major concern for card issuers who have to account for their clients' inability to settle their balance. In fact, card companies are expected to lose billions of dollars this year due to increasing delinquencies and charge-offs. As a result, many banks and card issuers are resorting to tougher practices.
Financial experts and advisers are urging Americans to have better control over their credit card usage. According to analysts, one good way to reduce debt and avoid future card debts is to employ management methods. This can include a variety of techniques that when used together, can help cardholders regain control of their spiraling credit card expenses.
Industry analysts say that instead of spreading payments to different existing balances, cardholders should focus on paying off dues on a card with the highest interest rate. Higher interest rates mean more money shelled out to settle balances. Dealing with these first can give consumers the chance to pay off their dues one card at a time. Though this method may appear counter-intuitive, experts point out that paying off balances starting with the ones with the highest interest rates is actually better than spreading payments on several cards.
Self-control is also essential for any cardholder to regain control over their plastic. Card companies may offer higher credit limits to entice consumers to use their cards more often. By allowing card issuers to raise credit lines and using just 20 to 30 percent of the credit limit, cardholders can increase their credit scores and rating significantly. Because their debt-to-credit ratios would be lower, their credit ratings would go up considerably.
Experts also recommend picking major credit cards over smaller retail cards. Larger brands are typically more reputable than smaller retail cards that offer special promos and discounts. Cardholders should also pay off their debts instead of just moving them around from one card to another, specialist says.