I think it has to do with the fact that companies/banks will be limited in how much they can raise their interest rates & tack on fees after the law goes into effect, so they are jacking up rates, adding fees, and removing customer discounts/incentives as fast and far as they can right now.

We just got notice that our Visa rate is going from 18.9% to 29.9%, with some kind of screwy program that decreases the interest rate gradually, or barely rather, UNLESS we're late with a payment EVEN ONCE, then the bank will cancel the program and we'll have to start from scratch after a probationary period. We pay our bill off every month and usually on time. But once in a blue moon I'll be a day or so late. We'll now get walloped with fees. We're shopping around for a new Visa card after using Citibank for 15 years. My preliminary research is saying the days of no annual fees and cash back are limited.

I got notices on two cards I never use that they are hiking rates to 29.9%. I am amazed there is not a general outcry about this. In a year or so they will all be begging for business again. I've read they are doing all they can to raise rates before the new laws kick in, and that they have decided to make up the losses they've incurred on the backs of existing customers no matter how good the customer is.

All this irritates me but nothing compares to the hate I am developing for fees that everyone and his dog are adding to practically every bill that comes into this house.

Linda

I recently received notices from Chase that they were changing the terms of 2 credit cards I have from fixed to variable rates. Like others above I pay on time and in full every month. So I called and then followed up by letter indicating that I would not accept the terms and closed the accounts. I know that many banks are messing around with the rates in anticipation of the new law that is going into effect. I've been a Chase customer forever and I let them know that I was really angry about it.

Sounds like a "hurry up, do it now!" pitch. Be careful of those "n months same as cash" offers. When you read the fine print, some of them really aren't. Or the rate on n months plus 1 day is astronomical.

Even my credit union has raised credit card interest rates, which doesn't strike me as a great idea. In their shoe's I'd want everyone to have nearly maxed out cards and to pay the minimum every month. As things stand, there are probably plenty of people who can barely do that. If higher rates mean they can't pay the minimum, there's the whole cost of collections, etc.

Fair warning: I am the contrarian in this discussion.

I can't understand the underlying premise in the outrage over credit card firms raising rates, changing terms etc. Reason--credit is a form of voluntarily going into debt to purchase goods and services. It isn't a right, it isn't a necessity, other than to hold reservations. And frankly, if people can't handle paying more, the solution is very simple: don't charge it on your credit card! Ergo, problem solved.

It seems to me that part of the reason so many people get into financial trouble is precisely the mindset that credit cards ARE necessary and that it is perfectly acceptable to charge items you can't pay for.

And this sentiment, expressed by several folks, puzzles me too:

"I recently received notices from Chase that they were changing the terms of 2 credit cards I have from fixed to variable rates. Like others above I pay on time and in full every month. So I called and then followed up by letter indicating that I would not accept the terms and closed the accounts."

If you pay off your credit cards in full at the end of each cycle, then why are you cancelling? What difference does it make if the credit card company decides to charge 400% interest, if you don't pay it anyway?

That's my situation too. We use our credit card for as much of our expenditures as possible because we get reward points. Haven't had to pay for airline tickets for years using those. We pay the charges in full every month. It doesn't make a whit of difference to me what the terms are. If the credit card company decided to, say, start charging interest at the time of purchase or something else that would incur a cost to me for using the card, I'd simply quit using the credit card. Problem solved.

But, back to my main point: if you don't like the way credit card companies are doing business there is a simple fix: quit charging, pay off your debts and don't use credit.

Now preparing to be flayed unmercifully...
Ann

I won't flay you because I agree that easy credit has turned us into a nation of people living beyond their means.

I would spread the blame around to the credit card companies who issue cards to people who are not credit worthy, charge exorbitant rates of interest, and reward their debt-soaked customers by extending them even more credit. I can get a multi-hundred thousand dollar mortgage at 5 percent interest, but the monthly interest rate on an outstanding credit card balance is 20 percent and more. Someone is making lots of money.

The concept of personal responsibility fails in the face of businesses, advertising, and a culture that tell us we can have it all and that we deserve to have it all. People are money-stupid. Businesses take advantage of the money-stupid people. The recourse is government regulation.

but the monthly interest rate on an outstanding credit card balance . . .
I meant yearly rate, not monthly.

I agree that if you pay your bills in full the terms don't matter. But if you *occasionally* make a large purchase that you know is beyond your means that month, maybe to take advantage of a sale or a limited quantity, then the increased rate may be a large factor and may also negate any savings. Obviously we always have the choice, and just as obviously many people have lived on too much credit for too long - the bubble has burst.

Can anyone explain how canceling a card negatively impacts credit? I read that in a financial article in the Chicago Tribune and it makes no sense to me. We used to have cards from early in our marriage from a number of individual stores, used once or twice with some promotion or other but I've cancelled all in the last year or so when I cleaned up our credit report. When we refinanced a couple of years ago we were golden, score was nicely over 800. Have I made a mistake cancelling those cards?

If you pay off your credit cards in full at the end of each cycle, then why are you cancelling? What difference does it make if the credit card company decides to charge 400% interest, if you don't pay it anyway?

Running, you won't get flayed and you posed a valid question. For me, it is about principal, that's all. I entered into an agreement with CC for a particular rate, I have one CC that I will continue to use from a different bank. To date, I have held up my bargain with the company. For no reason at all, the rates are going up. I find that to be unfair so to voice my displeasure, I closed the cards.

I know that there are those that are and have been penalized for high credit limits that the bank set for the cardholder. It doesn't mean that the cardholder accessed that credit but it was accessible nevertheless. However, since the cardholder had access, banks are sometimes operating on what could be rather than what is.

Hope this helps.

I did state that " Like others above I pay on time and in full every month." Yet, the bank still decided to raise the rates. My thoughts on why, both had high limits.

Deb

I understand that the credit card industry is changing its terms radically, and this will impact many people, some negatively. The bill in question was designed to protect consumers, mainly citing the need for disclosure...which is a good thing. Free is never free!

The specific portion of the email that bothered me was this line: "Due to the new "Credit Card Act of 2009", no businesses will be allowed to offer interest free, payment free financing as of February 22, 2010."

No business? from what I could tell that blanket statement is grossly untrue. And if it were, I think Glenn Beck's head might have exploded. LOL

I think yogacat hit the nail on the head - it is a tactic. I found it misleading, distasteful, and perhaps illegal. I was half tempted to send it to the state's attorney general for further investigation, but I'm sure they have better things to do with their time.

DLM - I think I can help you on how cancelling cards will negatively impact your credit. A portion of your score is based on how long you've held an account in good standing. If you cancel a card that you've held for many years, it will bring down the overall length of time that you've held good standing. I keep the accounts open that I've had for 20+ years, as they don't have a fee and I never charge more than I can pay in a single billing cycle. It can be a catch 22 though, as your overall available credit can sometimes be a hinderance. If you decide to cut back on your available credit, try your best to choose the newer lines of credit.

Thanks kismet - that makes some sense. But if I remember right, activity and highest balance are shown for each lender. If we've held a store card for many years but not used it, or only used it once for a relatively small purchase when we opened the account, it's surely not an accurate indicator of our credit worthiness! Fortunately we're long time customers with the 2 bank cards that we hold so that works in our favor.

DLM, I'm not sure that unused store cards would carry the same weight that a much used Visa or Discover card would.

DH made a mistake a while back. He decided to switch a Visa card he uses for business but keeps in his name. Wanted different hotel points. He cancelled one and opened another. When he called to apply, the woman who helped him explained that he had gone about it the wrong way. Instead of cancelling, he should have just called and had them do a switch. It took our 800+ and brought it down to around 790 or so.

I don't object to credit card companies raising rates, if they're clear about the terms. Some are sneaky, tho'. I question how well it will work given how many people have too much debt. I'd want to reduce my exposure by cutting back on credit limits on accounts that look risky. I'd be reducing the intrested rates on the accounts that are paid in full nearly every month, because I'd want to tempt those folks to spread out their payments. There's also a potential PR problem. If I pay my card in full every month, I may see an increase in the interest rate as personal insult. I've handled credit responsibly, so I don't want pay that new higher if I ever do need to carry a balance in the future because of an emergency.

I like how my credit union handled their increase. If you don't want to participate under the new terms, you can keep the existing rate on your existing balance, but you cannot make new charges. When the debt paid, the account is closed. I thought that was very civilized and smart. For those who are already overextended and skating on thin ice, the increased rate won't be the factor that pushes them into partial payments and collections. But they can't keep digging deeper with that financial institution. Too bad that it doesn't handle the PR problem with those who have a long history of paying in full.

Bringing up a tangential topic here, but, really, why should I worry about my credit score taking a hit if I switch cards? We don't need a loan for anything. We have an excellent history of handling what debt we've had (mortgages only, of manageable size). We pay our bills on time 99% of the time. We have stable job histories. I have a feeling that in the current state of the economy, being securely employed, good savings, and a history of financially prudence will weigh a lot more than having had a credit card with the same bank for many years.

Here is a link that might be useful: I think this article makes a good point

Forgot to post this article earlier:

Here is a link that might be useful: Annual fees going up too

Awm03, unfortunately, a credit score now involves more than just obtaining credit. It is also used when determining insurance rates and some prospective employers also check your credit score. That being said, I do feel that too many people unnecessarily fret over their credit score and become slaves to it.

Yes, I've read that too tishtoshnm, but it's something I wouldn't worry about when switching credit cards. If our FICO score drops 20, even 50 points, big deal. It will still be a relatively good score, especially in this day of increased bankruptcies, foreclosures, unemployment, etc.

Here's a recent WSJ article on credit scores & insurance. Financial reliability is more important than how long you've owned your credit card.

"...the most important factor in the Fair Isaac score is your payment history, such as delinquencies, collections or a pattern of late payments, followed by how much you owe, including your total debt and what percentage of your credit lines are used. Those two make up 70% of your score, with the rest based on factors like how long you've had your accounts, your number of new credit inquiries and your mix of credit types."

Read the whole thing in the link below. Interesting stuff.

Here is a link that might be useful: Car Insurance: Rate Shopping Can Pay Off -- WSJ, 10/7/09

awn...the article says that banks want to charge annual fees because they're not making any money on card holders who pay off every month. What a crock! Every time I charge something to my VISA card doesn't the bank charge the retailer 2-3%? That's why some retailers refuse to accept credit cards or they tell the customer if you pay cash your price will be a little lower (I've seen furniture stores do that).

I've cancelled all cards I no longer use. If that lowers my FICO score so be it, I don't need the stupid score anyway since I have no plans to buy a house. I'm more concerned with identity theft than a credit score. The less credit opened in my name the less chance someone will come across it and start charging on it illegally.

I pay off my credit cards every month, all 3 of them. I too have received notices from Chase and Wells Fargo that my rates have increased. They can raise it all they want, it doesn't affect me. But if they start charging me an annual fee that's when I'll raise hell, especially given how much I charge every month.

Has anyone else received notices that the cash back program has INCREASED from 1% to 2%? If the bank is so concerned about losing money why are they PAYING me more to use it? I get money from them every month, not the other way around. And if they're paying me 1% or 2% to use my card that means one of two things, either they're taking less of a cut from the retailers they're charging or they've increased the percentage they charge the retailers. No matter how it's working out, I'm still making money. Do you think they've sweetening the pot hoping I use the card so much I'll finally start racking up more debt than I can pay off each month...and then they've got me by the footlocks with their 30% interest rates? I'll switch to debit cards and even checks if they try to swindle me with a high annual interest rate.

You know what really irks me about all this...we the taxpayers bailed out these banks and now they're turning around and screwing us! How dare they, they ought to kiss the ground we all walk on for allowing them to stay in business but instead they're punishing the American public with 30% interest rates. If my bank so much as look at me cross-eyed I'll tell them where to go because I don't need them.

Good point about the built-in retailer charge, flyingflower.

When I write my letter of cancellation, I'll mention that the bank already got my tax money, and that they don't need more from me in the form of increased user's fees. Heh, heh!

Great thread. There is a wonderful Frontline story on credit cards and how they actually work. I would recommend to anybody(link below). I've seen several of my friends get into trouble with CCs and it is not pretty. When DH lost his job this summer, we were grateful that we had no cc debt or car payments. Even though he's got a new job now, the whole experience sure has me gun shy to even think about taking on any debt other than the mortgage!!

**For some unknown reason, I can't post a direct link to the Frontline story. You'll have to do it old-school.

http://www.pbs.org/wgbh/pages/frontline/shows/credit/view/

I just finished watching the Frontline show (love being able to view the entire 1 hour show from my computer!).
It was produced in 2004? WOW how profetic was that!

Here is a link that might be useful: Frontline