The economic crunch and the tougher federal regulations are forcing card companies to cut down on expenses just to stay afloat. Unfortunately, cutting down on expenses often means taking it out on the cardholders, says industry experts. To stay out of the red, many card issuers and banks are resorting to aggressive tactics just to maximize revenues and reduce costs. This can involve anything from raising fees and penalties, to slashing credit limits. Card companies are also increasing the pace as new regulations are expected to take effect early next year.
For instance, card issuers are increasing the penalties associated with late payments. Because the law does not prohibit card companies from raising fees and penalties on late payments, they usually have free rein over how much they are charging cardholders. Experts point out that aside from the hefty fines, consumers will also have to deal with lower credit scores because of late payments. Missing out on paying for more than 30 days can have a significant negative impact on cardholders' credit ratings. This can mean a harder time for consumers to search for new credit cards. Financial advisers say that cardholders should not only pay their dues on time but way before the deadline to allow some allowance for processing. Contrary to popular notion, card issuers do not automatically credit any payments immediately after receiving them. Experts recommend paying well ahead of time to give the card companies ample time to process payments.
Experts recommend paying well ahead of time to give the card companies ample time to process payments.
A recent survey also discovered that some 58 million Americans saw their credit lines cut significantly. This has resulted in many cardholders seeing their credit scores and rating drop substantially. Up to 35 percent of the credit score is computed based on the debt-to-credit ration that cardholders have. The higher the ratio, the lower the score. With credit limits slashed across the U.S., many consumers can expect their debt-to-credit ratios decline, thus leading to lower credit ratings.
Even with the expected drop in credit scores, consumers can still regain lost ground by adjusting to the changing trends. Cardholders who have relatively good credit scores are usually spared by most card companies. To maintain good credit ratings, consumers need to limit their credit purchases to at most a third of their credit limits.
Cardholders are also urged to review and reevaluate their credit cards' terms and conditions. Banks and card issuers are known to insert clauses and unwanted terms in the fine print of many card accounts. Knowing and understanding these can help consumers regain control of their cards.