Terms Changing on Many Credit Cards
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by: barrywaters
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Word Count: 498
Date: Tue, 31 Mar 2009 Time: 11:21 AM
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Owning credit cards during an economic downturn might look very different than it has the past decade. Like mortgage lenders, banks who offer credit cards are tightening their lending standards. They are decreasing credit limits, increasing interest rates and closing accounts that have been inactive too long. In fact, some customers whose accounts are current have even had their maximum credit amount lowered. And it is estimated that about 60 percent of banks have cut limits for subprime consumers. Banks are examining credit reports and reviewing credit scores for consumers who have existing credit cards with them. They have the right to reduce limits for those who have spotty payment histories or high balances that are consistently met with only minimum payments. For those who only pay the minimum required each month, an increase in rates could mean higher payments. Banks may even cancel some credit cards that have been inactive for over 12 months. Lower credit limits on credit cards can affect your credit score. A large portion of your score depends on the percentage of debt you carry when compared to your maximum allowed limits. Your percentage of debt will increase, if your limit is lowered. Your credit score could consequently be hurt. The cancellation of an inactive card can also affect your credit score, since long standing credit cards reflect positively on your credit report.
Over half of the people that have credit cards in the United States carry debt on those cards. That means that a lot of consumers with credit cards will be affected by the new restricted lending standards of banks. You can contact your credit card company if you are notified of credit limit or interest rate changes. If you are in good standing and have a record of low balances relative to your limit, you have a very good chance of convincing the company to give you back your original rates and limits. You do not stand a good chance if your account is not in good standing or you carry a large balance regularly.
It is always best to pay off your balances in full each month. If you currently carry debt on credit cards, however, read and understand the terms and rates for those cards. Pay attention to any new notices you receive regarding those credit cards. Your first goal in the New Year should be to tackle those carried balances. Start by paying more than the minimum amount each month. When possible, make cuts to your budget so you can put those funds toward your outstanding balance. Many financial advisors tell consumers to tackle the card with the least balance first, if you currently have balances on several credit cards. You may wish to transfer debt from higher interest credit cards to one with a lower rate. Do not wrack up more debt, even if you have a lower interest card. Be diligent and do not lose sight of your goal. The reward will be financial independence.
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Information related to credit cards, visit www.getsmart.com/credit-cards.
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