Passage of the Credit CARD Act protects those who slip up once in a while

QUESTION:
My husband and I are trying to pay off our debt. I keep track of the bills on Quicken and try to pay everything early. Today I was 3.5 hours late paying a credit card bill. Not like me at all, and I’ve never been late otherwise. Now I’m deathly afraid my interest rate will be raised. I tried calling after I paid my bill online. They have agreed to waive the late fee, as I have been with them forever, but I can’t afford higher interest on this card. Is there anything I can do? It seems so unfair the bill was just a few hours late today. Please help! — In Trouble

TO CONTINUE READING THIS ARTICLE, CLICK THIS LINK FOR CREDITCARD.COM:  Late credit card payments don’t justify rate hikes anymore.

The new act, which was signed into law last May, promises consumers more transparency about their credit card bill. But cardholders still need to watch out for a whole new series of traps and tricks

Higher fees: For starters, consumers could suddenly find themselves socked with a variety of new fees and charges.

Banks and other card issuers have already been aggressively implementing new fees or raising existing ones to help make up for any potential revenue lost as a result of the CARD Act.

Last May, for example, Discover Financial Services (DFS, Fortune 500) announced it would start charging a 2% fee on all purchases made outside the United States.

And whereas 3% was once the standard charge for rolling over a balance from one credit card to another, issuers like JPMorgan Chase (JPM, Fortune 500) are now assessing customers a 5% fee, according to Bill Hardekopf, CEO of the card rating site LowCards.com.

But with the new law setting no restrictions on the types of fees issuers can implement, consumers should pay particularly close attention to the “Terms and Conditions” section of their statement so they know exactly what they are being charged for, warn experts.

CONTINUE READING THIS STORY AT CNN.  CLICK HERE: New rules, new traps for credit cards – Feb. 17, 2010.

No longer will banks be able to raise rates on existing balances “at any time, for any reason.” Or impose sky-high interest rates because a customer is an hour late paying. Or slap a penalty rate on a good customer because he pays some other unrelated bill late.

That’s progress. But don’t whip out your plastic with abandon just yet. As fast as you can say “consumer protection,” some issuers have already devised new traps for unwary credit card holders. Consumer advocacy organizations have identified some of the most egregious new tricks.

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When you use a debit card, the money is immediately taken from your checking account. While using debit guarantees that you pay as you go, these cards have downsides, including a growing appeal to thieves. “As economic conditions have worsened, there’s been a noticeable increase in all types of card fraud,” says Avivah Litan, an analyst specializing in fraud detection and prevention at Gartner Research in Stamford, Conn. “But ATM and debit-card fraud is the top area of concern we’re hearing about from banks all over the world.”

Unlike credit-card thieves, who usually charge merchandise and then resell it to come up with money, people who create counterfeit ATM or debit cards by stealing your PIN and other account data can simply pull cold cash from your bank account. Using a technique known as skimming, they set up equipment that captures magnetic stripe and keypad information when you input your PIN at ATM machines, gas pumps, restaurants, or retailers.

Here’s how you can protect yourself:

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While the new rules will clamp down on retroactive rate hikes, they don’t prevent all negative changes to card accounts. Even consumers with high credit scores may not be able to avoid unwanted adjustments. If a creditor wants to cut your credit limit, it might do so because your credit score dropped, because your card usage is low or because of a change in your payment behavior. Card issuers can close accounts on good customers or institute a new fee.

The best a consumer can do to maintain a good score and keep account terms intact is to get in a defensive posture. Pay on time, keep balances low and don't close accounts unless it’s necessary to avoid an expensive change in terms.

Consider these 10 tips for managing your credit cards in 2010.

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In the past year, card issuers have rolled out or expanded their use of other ways to collect millions more in fees each year, many of which are hidden to consumers, according to the Durham, N.C.-based Center for Responsible Lending’s Dec. 10 report, “Dodging Reform: As Some Credit Card Abuses Are Outlawed, New Ones Proliferate.”

“Credit card issuers are going to more than ever try to find ways to make extra profits,” says Joshua M. Frank, a senior researcher with the Center and author of the report. New charges and changes to the way fees are calculated are adding to the balances of a growing number of cardholders. While some of the practices were instituted after the Credit CARD Act was approved in May, others were quietly being put in place earlier as a result of the recession. The one thing they have in common, says Frank, is that “none of them are explicitly prohibited by the Credit CARD Act.”

FOR CONTINUATION OF THIS ARTICLE, CLICK THIS LINK FOR CREDITCARDS.COM: Creative new fees escape CARD Act rules, surprise consumers.

I have been with a large national bank for approximately 50 years, with a checking account, savings account and a credit card. I have always paid on time and pay way more than the minimum required each month on my credit card. The problem is that I just received a notice from the bank that it’s changing my fixed rate of 9 percent to an adjustable rate tied to some kind of index.

I called the bank and the people there said there’s nothing I can do to change it, so evidently my good payment history doesn’t count for anything. I am thinking about transferring the balance due to my credit union, that still only charges 9 percent. Can you give me any advice? Thank you.

– Pauline

It’s not about your credit history. It’s about theirs! Many large banks have done such a poor job of managing their credit exposure that they now have to cut back customer lines and raise rates on credit cards so they can stay in business. But before I let you put the blame for this situation completely on the bank’s shoulders, I have to point out that you played your part as well.

I am going to give you the same advice that I would give anyone who is currently carrying a balance on a credit card, especially if it is a large balance. Pay it off as quickly as possible. As the Debt Adviser, it should come as no surprise that I am recommending getting rid of credit card debt. However, in our current tight credit environment, it is even more important than usual.

via 3 ways to master credit cards.

Borrowers already knew that late payments hurt their credit scores, but for the first time, they now know the extent of that damage.

Did you max out your credit card? Expect a credit score drop of 10 to 45 points. Declare bankruptcy? Your score will plummet by up to 240 points, and your odds of getting credit will nosedive with it.

The “damage points” data, unveiled recently by FICO, are part of the most revealing glimpse into the firm’s once-secret — and still mysterious — credit scoring model. The new information discloses how many points borrowers’ scores will drop when they make the most-common mistakes.

‘Help People Understand’ Scores

“I hope this information will help people to better understand FICO scores and the value for them of avoiding credit missteps. It illustrates key points such as the higher your score, the farther it can fall if you stumble,” says FICO spokesman Craig Watts. “Getting and maintaining a good score isn’t complicated. We all just need to pay our bills on time, keep credit card balances low and take on new debt sparingly. “

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“The reality is that the middle class today in this country is in desperate shape and the gap between the very very wealthy and everyone else is going to grow wider,” he begins. Sanders goes on to detail why he gets so very tired of hearing that this recession is over:

While markets surged past 10,000, the official unemployment rate stood near 10 percent. The United States is in a unique historical position. People on top are doing extraordinarily well, but in the real world the middle class is collapsing. The top 1 percent owns more wealth then the bottom 90 percent. CEOs of large corporations earn 400 times what their workers make. That is not what America is supposed to be about. With all the issues we are dealing with – from health care to global warming to wars in Afghanistan and Iraq – please do not forgot what is happening to tens of millions of our brothers and our sisters out there who are struggling hard to keep their heads above water.

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All day long, bill collectors call. She hunts for a second job, sometimes skips meals, and stays with other family members at a grandfather’s crowded apartment, trying to get out of debt and turn her life around.

She largely holds herself at fault. “Years ago, I lived for now. It was so stupid,” the 28-year-old says. “It’s depressing, but I can’t live that life anymore.” Now, she says, “I basically want to live for the future.”

The recession has forced a financial reckoning for Americans across the income spectrum. The pressure is especially acute for the low-income Americans who relied on borrowing for daily expenses or to gain the trappings of middle-class life. Shifting credit practices over several decades had enabled them to live beyond their means by borrowing nearly as readily as the more affluent.

But the financial crisis and recession have reversed what some economists dubbed the “democratization of credit,” forcing a tough adjustment on both low-income families and the businesses that serve them.

“We saw an extension of credit to a much deeper socioeconomic level, and they got access to the same credit instruments as middle-class and mainstream Americans,” says Ronald Mann, a Columbia University law professor. Now, “it will be harder for families at the bottom of the income ladder to get credit cards,” he says.

The financial crisis has forced lenders to be especially cautious with the riskiest borrowers, a category that low-income families often fall into because their debt tends to be higher relative to income and assets. The ratio of credit-card debt to income is 50% higher for the lowest two-fifths of Americans by income than for the top two-fifths, Federal Reserve data show.

For families with incomes between about $20,500 and $37,000, the ratio of debt to assets rose to 18.5% in 2007 from 14.4% in 1998 — more sharply than the increase among the overall population — according to the Fed’s Survey of Consumer Finances. In addition, the chances of default and delinquency on home mortgages are higher among lower-income households, according to data from Equifax and Moody’s Economy.com.

FOR THE CONTINUATION OF THIS STORY, CLICK THIS LINK FOR THE WSJ.COM”   The ‘Democratization of Credit’ Is Over — Now It’s Payback Time – WSJ.com.