Credit Card Terms Taking Turns For Worse

Vera Gibbons On How Issuers Are Tightening The Screws To Protect Themselves

(CBS)  The impact of ultra-tight credit markets is hitting your credit cards, and you might not even realize it.

On The Early Show Tuesday, financial contributor Vera Gibbons explained that lenders are tightening terms in numerous ways, and you need to be aware of all of them to avoid possible trouble down the road.

Behind the changes is the simple fact that lenders want to protect themselves from bad debt, so they're tightening standards and practices in hopes of avoiding defaults by credit card users.

What are they up to?

LOWER CREDIT LIMITS

This is the biggest and perhaps most ominous change of all -- and something many consumers won't realize has happened to them until it's too late. Here's what's scary: You don't have to "mess up" in order for a company to lower your credit limit. Big companies such as American Express, Bank of America and others say they can and will change terms at any time, based on market conditions and the economy in general. Any "perceived risk" can also lower your limit. That includes a decline in credit scores or late payments on other bills.

How much are credit limits being cut? In some cases, the cuts are big, Some companies are lowering the limit to right above your balance, and as the balance drops (meaning, as you pay off your debt), the credit limit drops, too. That makes it VERY easy to exceed your credit limit.

Credit card companies DO have to inform you that they're lowering your credit limit, but who really reads those small-print pamphlets that come in the mail? Consumers may not know their limit has dropped until they go over it and incur a large fee. Even worse than a fee, however, is how this affects your credit score. When a credit limit is lowered, it appears that you're using a much larger percentage of your available credit. That lowers your credit score, making it more difficult to obtain a mortgage, car loan, or even another credit card.

INACTIVE ACCOUNTS CANCELLED

Something else to keep your eye on: Banks are cancelling un-used -- and thereby, unprofitable -- accounts to eliminate the costs of maintaining those accounts. An inactive card can also be cancelled if your risk profile changes. That also hurts your credit score. Again, you may not realize this is happened. If you just have the card on hand "for emergencies," you're probably not paying any attention to it. But now, more than ever, you want to protect your credit score and keep it as high as possible.

FEWER CARD OFFERS

If you consider all those credit card offers in your mailbox, you'll be glad to hear that companies are sending out fewer solicitations. HSBC has sent out 54 percent fewer offers this year; Citibank, 45 percent fewer. But if you don't have great credit, that's bad news for you. When you get those offers in the mail, it means you've been pre-approved for a card. But if you have to search out cards and apply on your own it can, once again, lower your credit score. Plus, it's simply a pain in the neck, AND it's getting harder and harder to qualify for good cards. You may have to settle for one with a much higher interest rate.

FEWER ZERO-PERCENT OFFERS

Used to be that no-fee, zero-percent credit card offers were a dime a dozen. Carrying a lot of debt? Transfer to one of these cards for free, and pay zero percent interest for a year. Now, if you even qualify, the offers are more likely to be for six months. You're also likely to pay a balance transfer fee of 3 percent or more. If you're looking for a good zero-percent card offer (AND you have good credit), Chase and Discover still have a few deals.

NO SECOND CHANCES

Mess up once and that's it, you're out of luck. Banks won't hesitate to increase your interest rate or impose big fees if you pay late, etc. It used to be that if you were a good customer, you could call and basically apologize, explain your mistake, and ask that the fee be removed or your rate re-adjusted. But no longer. Card companies are holding firm to their punishments, and no amount of cajoling will change their minds.

[themroaches]

I am so pleased; and, the fact that my us-mailbox will no longer be spammed with "hundreds" of 0% pre-approval credit card offers is worth any amount of cajoling my future financing needs ..

[grandesign]

I am so pleased; and, the fact that my us-mailbox will no longer be spammed with "hundreds" of 0% pre-approval credit card offers . . ."
Posted by themroaches at 09:35 AM : Oct 14, 2008

I don''t know, they always made me feel important to get them. But then again, my shredder is not going to require as much maintenance due to minimal use.

[tscc2]

It is hard not to hate credit card companies. I respect them and the people who work for them as much as I respect a crack dealer.

[renonv5]

I always thought of credit cards as being a catch-22, if you use them and have a lot of debt, you can''t get a loan from a bank without paying them off. Then if you don''t use them, your credit rating takes a dive and you can''t get a loan from a bank. I paid all of them off and ripped them all up. Haven''t had one in 10 years and I refuse to play this game the "lawmakers" have set up to keep us going around in circles.

[navyjimfl]

have you noticed that on the front they now say "you have been pre approved" for a possible approval for a credit card......$200 limit.....big Whoop

[summarex]

I don''t understand

Why can''t we just rise up and send these parasites the way of French nobility.

[rocketjl]

These bank leeches created a financial fiasco and we are going to give them more money to get them out of trouble. As we get them out of trouble, they want to stick it to us again. They guys are worst than members of Congress or previously owned car salesmen (or is it the other way around?).

[legacyabq]

Here is an extremely interesting link to some historic and canonical information on usury in western civilization, from a Utah University. Check it out, it''s fascinating!

http://eh.net/encyclopedia/article/jones.usury

[gangesdak]

I hope, "No payment until 2012" kind of commercials would stop.

[legacyabq]

http://eh.net/encyclopedia/article/jones.usury

Aaaaargh why does it always break links???

[cbsguest6]

I like the idea of bringing back usury laws.

[credibility2]

This is what should have been in place all along to limit the egregious abuses and over extended situations far too many credit unworthy card holders have routinely relied on as a personal entitlement. The credit card companies were stupid for giving out as much credit as they did to those that hadn''t any business having a credit card. People should try living within their means instead of outside of it and then getting into debt they''re incapable of paying off. Even it this results in austerity and not getting everything a person feels they''re entitled to. For those in debt and if you''re not able to pay the balances down rapidly, at least consider adding to the minimum payment amount, the mount of accrued monthly interest and even doubling the interest amount added to the minimum payment. And forget cash advances, since you end up being charged generally a higher interest rate. It''s been too easy for too long. I don''t feel sorry for anyone who has gotten themselves over their heads with their debt. Not being able to pay off a debt is dishonest and unethical.

[barbaraf4]

The sad part is the government encouraged us to go into debt. Many of you are too young to remember this, but in the 70s and 80s, when the credit card companies were trying to get on their feet, the government let us writeoff credit card interest on our income taxes. Then the law changed and everyone was stuck with their debt.

The part I find especially sickening is that although you have a "contract" when you open a credit account, apparently now the lender has all the authority in the world to change credit limits and interest rates as they see fit.

Most of these little tricks they are coming up with sound like they are punishing the people who are making their payments.

In the London Times yesterday, Prime Minister Brown has released an enourmous amount of money into the British Banking System similar to what Bush and Paulson did here. The BIG difference was that he did it with 2 conditions: 1. All the bank executives had to be terminated and 2. There had to be a freeze on bonus''. Brown has not been a very popular PM, but it seems like he is doing a good job.

[koko98-2009]

cbsGuest is right. It was considered a captial offense to charge more that 10% during the middle ages. And we think we are more civilized than they were.

[macusweil]

GOP has ran up 11 trillion dollar deficit under last three republican presidents. Let''s hope the other nations we owe don''t get tuff with us to repay anytime soon.

[Jade_River]

Typical - blame the victim. Those of us able to decipher the tricks used by credit card companies know that they use tricks which are, at least, immoral. They use these tricks without regard to the age (college students are always an easy target), intelligence or financial ability of their prey. The least able are charged the highest rates. The least intelligent are trapped into stratospheric interest rates - upwards of 30%. 30% interest rates should be criminal regardless of how responsible or irresponsible an individual is. We have an economy that builds material addiction, dangles the possibility of having it all, then penalizes those who take advantage of the irresistible.

[grvmstrj]

This is all maddeneing. I''ll admit I got caught up in this fiasco and QUICKLY found out that the entire credit system will lie, to you, rip you off and then charge one for discrepancies. 10 years ago my credit was "very good". Now I am frightened to evfen look at it. For all of those that might think that therefore I am a risk, or dishonest-get real (and a TURE life). We are treated by ALL of the wealthy (both private and governmental agencies) as C-A-T-T-L-E!

[missingamerica]

Not being able to pay off a debt is dishonest and unethical.

Posted by Credibility2 at 10:57 AM : Oct 14, 2008

Ruh roh...well, going by the taxes the Treasury receives in comparison to the Republican national debt, you have just condemned the United States of America for being dishonest and unethical.

Not to mention a whole FLOCK of banks and corporations.

But that is different, of course...ethics is a matter of scale to a Republican.

Once you accumulate enough wealth, you are immune to moral, ethical, and most certainly legal judgment in the eyes of a Republican.

It truly is an entirely different world out there, once you have EVER accumulated significant wealth.

[sumarongi1]

All because of the rampant GREED of a few. They raped all of us and then we bail them out to the tune of a trillion dollars. They got the money, we got the shaft.

[sumarongi1]

Now McCain wants to reward them again by cutting capital gains taxes on stocks. Go figure that one.
People with large monetary reserves just bought up the shares of the smaller investors who got jittery and sold low. Now they want tax protection to protect them from paying for their ill-gotten gains.

[missingamerica]

One part of the constitution that really sucks is the unlimited ability of congress to borrow money on behalf of the American taxpayer.

Posted by cbsfan731 at 11:50 AM : Oct 14, 2008

It is often necessary to borrow money - no matter your size in economic terms - in order to accomplish great things, so I do not rue the Congress'' ability in that area.

However, what I do believe is that the greatest crime ever committed by our Federal government - second only to Bush''s lies to justify the invasion of another sovereign nation - was Congress'' use of Social Security funds for budget items.

Every Congressperson who authorized such theft and every corporation or individual who lobbied for such theft should have their assets siezed where possible and their estates siezed where not.

[analogtwin]

Well, it''s about time that lenders started taking more responsibility in protecting themselves and the credit market. That''s why regulating the industry is key. These banks and investment firms, when unregulated, will do anything short of loan sharking to make a loan. At least with the fear of having your legs broken there''s slightly more effort and forethought put into paying back the debt. Let''s regulate the industry. Yes, it might slow things down in the credit world. However, no one wants to see this credit crisis happen again. And I for one don''t want to pay for it twice.

[sumarongi1]

Just goes to show that the banks really are the low-down dirty rotten bustards I''ve always thought they were. Fees for this, fees for that. If they could figure a way to do it they would tax you on your breathing.

[prof_s]

Wow! These companies used to give it hard to everyone through tempting offers and high, higher and even higher interest rates. Now that the taxpayers have played nice and promised they can keep their jobs for giving it to everyone for so long, now they''re going to give it to us even harder without even trying to seem alluring. I''m thankful each and every day for my EuroCard.

[missingamerica]

What great things has this accomplished? maybe for a few, but the majority are suffering for it. Where''s the payoff or benefit?

You agree with unlimited ability to borrow on your behalf?

Posted by cbsfan731 at 12:06 PM : Oct 14, 2008

Given that I am rather fond of and impressed by our nation''s:

1) System of highways
2) Air traffic control system
3) Military
4) Ports
5) Initiatives in space
6) Research into disease prevention and control
7) Educational system
8) Programs to help the poor and the unborn

(I could go on, but you get my point)

and given that I would rather speak English than German or Japanese...yes, I do not mind some debt.

What disgusts me are those who - although their billions and other assets receive substantially more benefit from our nation''s above listed programs - continually whine about "forced income redistribution".

Going by their outlook, he who owns a $10 million home should have to pay no more in insurance than he who owns a rundown trailor, regardless of the benefit that they receive in the event of catastrophe.

THAT disgusts me.

[easeup-2009]

You have to be a complete moron to carry a balance on a credit card.

[debbiemack-2009]

sumarongl1

Poor little jittery guy sold low? Nobody forced him to sell low. How would he feel if stocks skyrockted and he sold high? Guess he would not object to a lower capital gains tax then. You present an assinine argument my friend but it fits with liberal thinking. If you take a risk and loose....you want to be rewarded anyway. Let the rich refund your loss because they have money. Just tax the rich and give it to the poor. I guess Communism still lurks in the minds of the mindless.

[iowacotton]

Does this mean I won''t be receiving those pesky credit card solicitations in the mail anymore? I hope so, ''cause I''m so sick and tired of shredding them.

[debbiemack-2009]

easeup
You have to be a moron to carry a ballance on a credit card.

My friend, they are out there! who do you think is voting for Obama?

[exfed4]

It only took destroying the credit market before these freaking morons FINALLY decided to tighten things up.

[bbharr1994]

Who is really financing the $700 billion+ bale out? The borrowed money for our stimulus check came from a wealth Arab. Did the $700 billion come from there too and our tax money is paying him/them back?

[debbiemack-2009]

Sumarongi1

So keep your money under your matress! Only a moron needs a bank.......unless you want to earn interest on savings, on CD''s, need a mortgage, need a home equity loan etc. Just pay out of your MATRESS Money for what you can afford. No one forces you to use a bank. Dummiecrat

[foxsmart10]

After my bankruptcy nine years ago, I learned a serious lesson. Don''t live beyond your means and live a life style you CAN''T afford. Hear''s a simple guide to staying in control. Destroy all credit cards with zero balances. Keep "One" visa/Mc the oldest. One Amex you must pay off each month. Pay cash for day to day cloths, food, fun items, entertainment, if you have no more cash until paycheck, don''t pull out those credit cards. We must be responsible for our lives, don''t get trapped in credit card debt by borrowing for what you can''t afford. Very Simple way to live, like your grandparents did. They had NO visa and MC paid cash. Stop making the Banks wealthy on the backs of hard working folks. Don''t play their game of the cycle of deep debt.
a

[debbiemack-2009]

Does this mean I won''''t be receiving those pesky credit card solicitations in the mail anymore? I hope so, ''''cause I''''m so sick and tired of shredding them.

Posted by IowaCotton at 12:
You have posted one of the few intelligent comments on this site. Both my wife and I agree. When are all those green people going to go after credit card solicitiations versus drilling in Slaska'' ANWAR.

[debbiemack-2009]

Does this mean I won''''t be receiving those pesky credit card solicitations in the mail anymore? I hope so, ''''cause I''''m so sick and tired of shredding them.

Posted by IowaCotton at 12:
You have posted one of the few intelligent comments on this site. Both my wife and I agree. When are all those green people going to go after credit card solicitiations versus drilling in Slaska'' ANWAR.

[foxsmart10]

I''ve learned a life changing lesson after my bankruptcy nine years ago. Don''t live beyond your means... "Simple Formula" If you mindlessly reach for that credit card you most likely CAN''T afford your consumerism bad habit. Cut up all those retail cards, Keep One Visa/Mc, and try and pay it off every month. Stop borrowing at nearly 30% to fund a lifestyle you can''t afford. Dont get sucked in to the credit card companies planned cycle of debt for life. It makes them rich and happy. If you don''t have the cash, stay home, don''t pull out that maxed out card.

[bbharr1994]

How much did our current President lose before he woke up and decided to do something about this financal mess we are now in. This is the same President that didn''t know we were paying $3.50/gal for gas several months ago.

[easeup-2009]

After my bankruptcy nine years ago, I learned a serious lesson. Don''''t live beyond your means and live a life style you CAN''''T afford. Hear''''s a simple guide to staying in control. Destroy all credit cards with zero balances. Keep "One" visa/Mc the oldest. One Amex you must pay off each month. Pay cash for day to day cloths, food, fun items, entertainment, if you have no more cash until paycheck, don''''t pull out those credit cards. We must be responsible for our lives, don''''t get trapped in credit card debt by borrowing for what you can''''t afford. Very Simple way to live, like your grandparents did. They had NO visa and MC paid cash. Stop making the Banks wealthy on the backs of hard working folks. Don''''t play their game of the cycle of deep debt.
a

Posted by foxsmart10 at 12:41 PM : Oct 14, 2008

I use my credit card for just about everything--it''s a convenience. Your problem is that you didn''t pay the entire balance off each month.

[resqdiver4]

Well, geeze people, although I will be sorry to see those advertisements coming ini the mail for new credit cards, I certainly won''t miss them! I guess we will have to do things the good old fashioned way, pay cash for things instead of credit cards!

[belmel-2009]

DebbieMack wrote: easeup
You have to be a moron to carry a ballance on a credit card.

My friend, they are out there! who do you think is voting for Obama?

Debt is no respecter of political affiliation. You don''t have the stats to back up your shoot-from-the-hip smacktalk. Grow up and act like an American, babygirl.

[belmel-2009]

"I don''''t understand

Why can''''t we just rise up and send these parasites the way of French nobility.

Posted by summarex at 10:39 AM : Oct 14, 2008"

If that is a motion, I''d like to second. All in favor say aye.

[mollydtt]

I hope I never get another pesky pre-approved credit application in the mail again.
On another note--just because we see beautiful spacious homes on TV or see all the latest technology advertised, it doesn''t mean we can afford them. Advertisers are savvy about making us "need" things we can''t afford and really *don''t* need.

[caldwellptr]

After learning the hard way, and now being totally shut out of almost all kinds of credit, I can not understand why anyone would want a Credit Card? Why would anyone need a personal line of Credit for a meal, shoes, or a more dire situation - groceries? If everyone had to go into a bank, apply for a loan - even a personal loan - anytime they needed any of the above, everyone would be in better shape now. Loans used to be for the "big ticket items" like houses and cars, but also washer and dryers or other durable goods. And loans used to be more straight forward, no gotcha fees and penalities.

I''ve heard that in the past bankers knew your name, and whether you were good for a loan. Trying talking to a derivative.

[caldwellptr]

Anyone Remember Lay Aways?

[redlipsahead]

WHO CARES AS IT WONT BOTHER ME OR OBAMA BECAUSE WE EARN OVER $250.000 A YEAR.

WHY WOULD ME OR OBAMA CARE ABOUT YOU PEASANTS?

OBAMA NEVER CARED ABOUT YOU BEFORE, WHY WOULD OBAMA CARE ABOUT YOU NOW? HE DOESN''T..... HA HA HA

[easeup-2009]

After learning the hard way, and now being totally shut out of almost all kinds of credit, I can not understand why anyone would want a Credit Card?

Posted by caldwellptr at 01:21 PM : Oct 14, 2008

You just answered your own question. I think there should be an IQ test requirement before a card is issued.

[easeup-2009]

Why are you libtards getting so puckered about this article? This is a GOOD thing!

[redlipsahead]

WHO CARES AS IT WONT BOTHER ME OR OBAMA BECAUSE WE EARN OVER $250.000 A YEAR.

WHY WOULD ME OR OBAMA CARE ABOUT YOU PEASANTS?

OBAMA NEVER CARED ABOUT YOU BEFORE, WHY WOULD OBAMA CARE ABOUT YOU NOW? HE DOESN''''T..... HA HA HA

[neenga]

"WHO CARES AS IT WONT BOTHER ME OR OBAMA BECAUSE WE EARN OVER $250.000 A YEAR. WHY WOULD ME OR OBAMA CARE ABOUT YOU PEASANTS?"

This is a disgusting, mister. I hope you are kidding, but I fear you are just one of those redneck types who give Americans a bad name. We make over $250K a year also, and yes, we SHOULD pay more taxes than many others!

[neenga]

"And loans used to be more straightforward, no gotcha fees and penalities."

Once upon a time, that was true.