Credit Card Crunch

01:24:23 AM Tuesday, September 11, 2007

Credit Crisis May Affect Credit Card Deals

Credit is an integral part of the U.S. economy. Making costly purchases like real estate and autos, we contribute to the development of these industries. When it becomes problematic to receive these goods, customers and businesses react at once, i.e. the number of investments and expenditures declines. The results for the economy can be disastrous. According to the Federal Reserve report, a credit crunch in real estate market is topping out. On conservative estimate the crisis will not go out of housing market limits. Analysts have opposite views to the problem concerning credit card deals. The question is: How will credit crunch influence credit card users?

Credit problems started with "subprime" mortgages. Unfortunately, they keep on expanding to solvent clients as well. Housing market slumped last year and it had certain consequences. First of all, credit card companies decided to tighten the standards in order to protect themselves from frequent delinquencies. According to Equifax analysis, they jumped up to 5% in the past year.

Be careful about credit card changes. You may not even notice them, they are very insidious. But specialists acclaimed they are of great importance. Many credit card issuers cut the length of introductory period. Pessimistic estimates among specialists are not rare. Some of them assume even the worst scenario with no introductory period at all.

Another troublesome item is that credit limits can be shortened. It means that the average limit of $6,000 is cut to $5,000. The hardest terms will be for subprime card owners. Their credit limit will be no more than a few hundred dollars. Besides, credit card companies become exacting. A couple of years ago the credit card approval rating was 50-60%. Now it's only 35%. It means that your credit score must be no less than 690 or 700.

Credit companies are raising interest rates and fees. It is a nasty shock for credit card owners. Some of them experienced the changes, and it caused the burst of indignation. To avoid such troubles in future, follow simple rules. For example, observe your credit-card mailings. In case your credit line is lowered, you will get a letter from your credit card company. Try to be on the safe side, i.e. stay within reasonable limits. If your credit line is cut, you will escape default pricing pitfalls. This way you'll be prepared for the changes and they won't hit your wallet.

Let's assume you forget or ignore this fact, and you exceed the credit line that was lowered by your credit card issuer. In this case you face penalty pricing. It means your interest rates can be boost up to 30 percent. Again, they should inform you about it. You will get a letter within 15 days. You may simply opt out the interest rate hike. Keep in mind you should do it in writing. Generally speaking it means you are supposed to give up the card.

To cut it short, try to be more attentive to the terms and conditions of your credit card company. Bear in mind they are changeable and they are not tricks of your company. Monitor these changes and don't get into trouble.

Well, I understand that credit card crunch affect credit companies and they have to do something to improve the situation. But why I have to suffer from a crunch? Mustn’t banks take measures to prevent credit card crunches and keep their customers safe?

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