How to beat Higher Interest Rates and Fees on Your Credit Cards

The Credit Card Accountability, Responsibility, and Disclosure Act, which was recently passed into law, is intended to protect consumers from arbitrary and unannounced interest rate hikes, fees, and penalties charged to them by credit card companies.

Despite being passed in May, the protections provided by the bill don’t go into effect until late February of 2010 which has given the credit card companies the opportunity to make everything in sight more expensive for their borrowers. Lenders have been raising rates and fees on credit cards since the fourth quarter of 2008, when the mortgage crises began taking big bites out of the profits of the issuers. Credit card companies, while fighting the passage of the bill for the first half of 2009, also anticipated its ultimate approval. That anticipation, combined with increasing losses in their credit card portfolios spurred a gradual upward creep in what it will cost a consumer to hold a credit card account.


The creation of the Consumer Financial Protection Agency, with a mandate to oversee The Credit Card Accountability, Responsibility, and Disclosure Act has increased the banks’ urgency to raise overall expenses as much as feasibly possible prior to the caps and restrictions that will accompany the bill’s implementation next year. Those big increases are now in the process of going into effect at credit card companies across the spectrum. One of the increases which will hurt credit card holders the most is being implemented by Chase, which is increasing their minimum monthly payment requirement from 2% to 5%. That increase will force a consumer currently paying a minimum of $600 to come up with $1,500 per month, regardless of promises made or any promotional rates that may have been used to get the balance transferred to Chase.


As of this writing, Chase is the only bank to announce such a huge increase in minimum payments but, now that the ice is broken, expect others to follow suit. Chase has defended the increase saying that it affects less than one percent of their customers, but they still have until late February of next year to expand the requirement to a higher percentage of their customer base. Other estimates are that the increase will affect up to a million card holders. Chase, Bank of America and others have also raised balance transfer fees by 33% to 66%. Expect other increases on fees, interest rates, and penalties ahead of the caps that go into effect in February.
The bad news for consumers is that if you hold credit cards, these increases are coming your way, only varying by degree. The good news is that there are actions you can take now to either avoid the increased expenses or minimize the damage as much as possible.


* Read everything that comes from your credit card issuer – It’s easy to throw away all the boring small print materials that constantly end up in your mailbox. Break that habit now because that small print could be notifying you of impending cost or payment increases on your account. It’s much easier to fight those increases before they actually show up on your bill. If the issuer doesn’t bend, it’s time to start looking elsewhere.


* Start shopping for deals now, not later - Despite the generally rising tide of expenses at credit card issuers there will probably be those that allow free or low cost balance transfers, introductory rates, etc. to lure new customers. Again, read the fine print to make sure you know what the fees are, when introductory rates expire, and any other terms that may affect the costs of maintaining the account. With skyrocketing minimum payments and interest rates, a promotional deal offered by a company trying to accumulate accounts could save you thousands of dollars per month.


* If you are struggling, consider debt negotiation – If you are stretching to make your payments now, chances are things aren’t going to get any easier. With a high credit score you may be able to transfer your balance to a new issuer, but large balances combined with a low credit score aren’t going to transfer anywhere and are likely to become unworkable as many of the upcoming increases will be pointed at troubled card holders. In that situation, a debt negotiation could be your best bet. You benefit immediate is an approximate 50% decrease in the monthly payment on all the accounts included in the negotiation. In addition to credit cards, the accounts which can be included in a negotiation are medical bills in collections, department store cards, signature loans, overdue rent, unpaid utility bills, unsecured lines of credit, and revolving charge accounts. Negotiated accounts can normally be paid off in full within forty eight months.


Consumers are being faced with new challenges every day and the next round coming from the credit card companies will be big one, especially for those carrying large monthly balances. If you are struggling, waiting for a solution to appear is not the right approach. Congress has pretty much done what they intended but left consumers exposed for another seven months. Those that take a proactive stance and pursue solutions ahead of the arrival of fee and rate increases will be able to save thousands of dollars, perhaps monthly, while others continue to struggle with payments growing beyond their reach. As treacherous as things are in the current economy, the steps you can take now with your credit cards and other consumer debts are relatively simple and can make a huge difference in your quality of life; something a MasterCard commercial might call “Priceless”.

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