As the lending industry tries to rectify the mistakes that led to the subprime lending crash, other lenders are preparing to follow suit. And even those of us with decent credit and responsible personal finance habits may soon feel the sting. Credit card companies are preparing to raise fees and boost interest rates. I received notification in the mail this week that the lovely fixed rate on one of my credit cards is about to switch to a variable rate. And that’s not all. Many credit card companies are upping such fees as those charged for late payments and going over the limit.
Avoiding the boost in interest rates
Unfortunately, one of the only ways to avoid the boost in interest rates and fees is to reject the changes. Most credit card companies will allow you to do this when the notification comes in the mail. It means that you can pay off your current balance under the old terms, but you may have to close your account. If you don’t have to close your account, you will be switched to the new terms as soon as the old balances are paid off (and technology allows credit card companies to keep track of “old” and “new” even as you use your credit card).
The other thing you can do is switch to an introductory offer from another credit card. This, however, is probably a short-term fix, as the intro rate will disappear sooner or later. And you may find that these intro rates are scarce anyway.
Credit card companies tighten standards
Admittedly, tightening standards at most credit card companies isn’t a big thing. After all, the standards are so loose (some even say predatory) that any tightening at all still leaves plenty of room for those who are somewhat “credit challenged.” However, the fact is that credit card companies are sending fewer of those introductory letters looking for new customers. Most of the new offers will consist of something like 3.9% instead of the 0% cards of last year. And you will find that getting a credit line increase is a little harder as well.
All things considered, though, this may not be a bad thing. Isn’t part of the problem that predatory lenders were preying on people who couldn’t reliably pay it back sooner? It’s too bad, though, that the rest of us have to penalized as well.