Word To The Wise - Dump The Credit Card - Save Save Save
Please try to get rid of your credit card debt. Banks are raising their interest rates across the board. The only thing that is certain about our economy is that it is going to get worse. If ever there was a time to pay off those credit cards it is now.
"I would expect banks to raise fees on a variety of services to offset some of the losses," says Richard Bove, a financial services analyst at Punk Ziegel. "They're going to start to nickel-and-dime you to build non-interest revenue."
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Banks are losing money on loan defaults. They plan on getting some of it back through the consumer. They can raise you rates in various ways depending on the "FINE PRINT" in the contract you signed to get the card. They count on the fact that most people do not read the contract or they may not understand the legalities. Costs for the necessities in life such as transportation, food, clothing and housing are on the rise. What is affordable now will cost more in a year. Many Americans are tens of thousands in debt because of credit cards. Think about the purchases you make and how much interest you are paying for using but not paying off a credit card. If you need to use your credit card to get by, you are digging a hole whose bottom could drop out.
Read the fine print
The terms of your loan will detail the fees and rates you'll be charged. Be sure to note whether those terms can change. Among consumer loans, credit card terms both rates and fees change most frequently. Auto loans carry fixed rates and tend to spring fewer surprises on borrowers, experts say.
Contact the lender early if you can't pay
The lender may be willing to work out a payment plan. You don't want to stick the bill in a drawer and wait until the collection agency calls.
Digg del.icio.us Newsvine Reddit FacebookWhat's this? By Kathy Chu, USA TODAY
To understand how the collapse of the nation's real estate market is hitting borrowers of all kinds, consider Carson Moore.
Moore, of Elkton, Ky., says he always pays more than the minimum due on his credit cards, and does it on time, every time. But in January, Bank of America told him it was nearly tripling his interest rate, to 22%.
"I don't know why they did it, but I'm not very happy about it," says Moore, 60. "It's not like I miss payments or anything."
Bank of America (BAC) says it's raising rates on some card accounts based on "periodic" reviews of consumers' risk. The change, it says, isn't directly linked to delinquencies on mortgages and other consumer loans. But as banks' losses mount, they're jacking up fees and rates and tightening rules on all sorts of consumer loans — from credit cards to auto loans — to cushion their losses, some analysts say.
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"Banks will want to make up that income somewhere," says William McCracken of Synergistics Research, a research firm. "They're going to be much more aggressive. Everyone is going to see some (price) increase unless they have perfect credit."
By raising rates and fees — but not boosting them so high that they push borrowers into default — lenders are seeking a "delicate financial balance," says Robert Manning, a finance professor at Rochester Institute of Technology. "They can't squeeze too hard that they're going to kill their client. But they have to squeeze more revenue out of their current portfolios."
Even as the Federal Reserve has aggressively slashed short-term interest rates, banks are raising rates on some credit cards. They're also boosting late fees, lifting caps on balance-transfer fees and raising ATM fees for other banks' customers.
Bank fees have been rising for years. But as their loan losses have surged, banks have become quicker to raise certain fees and rates, analysts say. Lenders collected a record $18.1 billion in penalty fees last year just on credit cards — up 69% from 2003 — from such customer missteps as paying late or exceeding a credit limit, according to R.K. Hammer, a consulting firm. The fees are likely to rise an additional 5.5% this year, Hammer says, because of late fees as people struggle to pay bills.
Escalating fees and rate increases come at a politically explosive time. Congress has held hearings on whether banks need tighter regulation given the increasingly broad range of credit-card fees and policies — such as deadlines in the middle of a day for receiving payments — that have tripped up consumers.
Ahead of those hearings, companies vowed to scale back some of their fees and punitive practices. Chase, for instance, announced then that it'd stop raising card rates on customers whose credit scores had dropped, and Citigroup said it would no longer raise rates if customers paid late to other creditors.
