Clark Howard:
http://www.cnn.com/2009/LIVING/personal/02/13/clark.howard.credit.cards/index.html
ATLANTA, Georgia (CNN) -- I've been getting many calls from listeners who are outraged or perplexed by the actions of their credit card issuer.
The issuing banks are raising interest rates by 20 percent or more -- even if the individual has good credit, has never been late on a payment or hasn't even had any change in their credit standing.
This is happening across all income levels. It's even affecting successful business owners and moderate to wealthy individuals. Fortune magazine recently spotlighted one small business owner who had a card that went from nearly 8 percent to 26 percent, even though nothing changed with his finances or payment history.
Bank of America, Citibank and Capital One are among the big issuers arbitrarily jacking up rates in the face of what they often cite as a "continually changing business environment." In fact, the Federal Reserve reports
37 percent of banks have increased their interest rates.
The reality is that the banks are fearful of the high rate of credit card default, and they know they've got you if you're among the
70 percent of Americans who carry a month-to-month balance.
The good news here is that there are new rules coming that will stop the banks from retroactively raising the rate on existing balances you already carry. The banks will still, however, be able to raise the rates if you stopping paying as well as on all future purchases.
But what stinks is that these rules won't go into effect until July 2010. That gives the banks plenty of time to lobby members of Congress and get this pending legislation overturned.
For right now, the problem with banks jacking up the rates is that they're making it tougher for someone who might have been able to pay at 5 percent but could never pay at 30 percent, for example.
So they're setting
you up for failure, and they're shooting
themselves in the foot at the same time.
The only smart move is to pay your debt down or pay it off entirely. And don't assume you're a sitting duck if your credit standing is decent. You can always shop around for a card that has a lower rate. Try looking at Web sites such as
CardWeb.com or
CardTrak.com to find the best rates.
I also have a special warning for you if you're buried in debt and thinking about using one of those debt-negotiation firms that advertise all over the Internet and late-night TV.
Do not believe these people about their ability to negotiate with your credit card company and reduce your outstanding balance by 50 percent or more. These con artists get you to pay them money as a retainer and then tell you to stop making all payments while they negotiate on your behalf.
But they're rip-off artists through and through. Many banks won't even take a phone call from these people anymore because they're on to their game. That leaves you scammed out of your retainer fee while your bills continue to pile up.
There is a better way to address your debt. Try calling your credit card and telling them you're in over your head. You may get blown off, or they may work with you. If you do get the cold shoulder, go to
NFCC.org -- the National Foundation for Credit Counseling -- and find a local affiliate who can help you come up with a debt-conquering plan for free or very low cost.
You didn't get into credit card debt overnight, and you won't get out of it overnight; the recovery is going to be a slow step-by-step process.
Plus I will get 3 paychecks in July which will be nice.