You may have noticed an increase in credit and credit card offers lately. Don’t be drawn in. The rules are about to change and the increase in offers is an attempt to lock in the old rules on those willing to play by the old rules.
So what are the old rules vs. the new rules? I am not sure, but I do know this, they involve high fees and high rates with harsh penalties, new or old. Like so many things coming out of Congress these days in the way of financial regulation, the details somehow get lost in the delivery to the public. I do know that there are rules trying to reign in the current almost obscene method credit card companies are using to adjust rates and charge fees.
In fact if you have listened to Clark Howard, Suze Orman or Dave Ramsey you have probably heard at least one call from a listener telling their story of how the credit card company was changing the rules on them mid stream and wondering what they could do about it seeing how they had been a long time good customer with that company. If they do not have any free cash available to close out their account then most times the answer seems to be try to negotiate with the company or try to live with the new terms. (Wherever possible provide yourself some options.)
Trouble is many people have been living on the edge for so long that there is no room for new terms. All of their spending money is pre committed and they are stretched to pay the minimum balance on these credit cards as it is. Sad to say but many people had a very hard time making their new minimum payment the last time Congress got involved and raised the required minimum payment on outstanding balances as the Congress’ way of trying to help (by force) people to lower their debt levels.
The latest round of increased minimum payment is coming about because of changes in the interest rates charged to the card holders by the card companies. The higher the rate, the higher the interest charges and the higher the minimum payment based on that higher charge. These rate changes come about because of changing terms that made your fixed card now a variable card or even worse. Some card companies have added clauses that state if you are late or default not only on their account but that of anybody else’s account they will raise your rate to loan shark levels, and they are doing it.
“But I had an agreement with them” you say “they shouldn’t be able to change the rules mid stream.” They shouldn’t but they do and it comes in the form of a little tiny printed piece of paper that comes with your statement every so often. Do you take the time to read all of them all the way through? Buried in the legalize is the change and if you aren’t paying attention they have you because it usually comes with a phrase or two that indicates your options are two, either continue to use the card and by default accept the new terms, or notify us now and we will cancel your account and your bill is now due in full for the outstanding balance.
If you are able then my suggestion is to pay off the amount in full and close out the account. Let’s put the power of the consumer back in our pocket. There are still lots of competition for credit cards out there if the number of offers I get is any indication which means there are still many companies that should be competing for my business. I as the consumer have the power to pick and choose who has the best deal to meet my best interest. I get to decide which if any is right for me, and I will vote with my hard earned dollars who I will work with, even if that means none at all.
After the new rules go into effect we should begin to see a new set of offers from companies that are trying to decide how best to play the new game in town. If you can hold off till then I think you will be better off for it. When it comes, I think it will be in all of our best interest to take a close look at what the new offers are and compare them to what we have now and actively switch to a better provider if one is found. Credit Card Companies you have officially been put on notice. If you don’t treat me better, and with the respect I deserve then You Are Fired.
The new rules Congress is laying down should make it harder for the companies to change your rules mid stream like they are doing in abundance now, but to get the new rules to apply to you it sounds like you will need to create a new account where the new rules will apply. I hope that is not the case but if it is I see it as an opportunity for those willing to spend the time and effort to search out better and more trustworthy companies to work with in the future. I will share with you my ideals of standards for a credit card in a later entry.
This is Ed Nef with a view from the Farr West.
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