With the price of almost everything on the rise, consumers are pulling out their credit cards more often in order to “make ends meet”. A recent report said that revolving credit (that includes credit cards), has seen an 8% growth rate in the past few months. This is the fastest growth rate for credit in seven years.
The result of this increased use of credit cards is that individual credit card balances are growing as well. That means that the required minimum monthly payment, which is based on a percentage of the balance, is going up and putting even more strain on that already squeezed monthly budget.
Understandably, this is why more and more consumers are falling behind on their monthly payments. Credit card companies don’t like this because it impacts their bottom line…profit. Late last month, American Express issued a warning that their customers were falling behind on their payments. This got the attention of the Wall Street people who came out with their own warning saying that credit card companies may have to lower their projected earnings for 2008.
What followed was a move by some of the credit card companies to take action to lower their risks. First, they reduced the maximum amount of credit extended to an individual (Washington Mutual and Wells Fargo recently cut credit limits by up to 10%). In addition, they raised credit card interest rates and began cutting back on the number of balance transfers they would allow.
The credit card companies were strategic in the way they approached this because they targeted those individuals who they thought were most at risk for default. For the most part, they focused on individuals who: 1) Recently made large purchases relative to their credit limit, 2) Live in California, Arizona, or Florida (the states hardest hit by the credit crisis), 3) Own a small business in the real estate industry.
Hopefully, you don’t fall into any of those categories and weren’t impacted. Even if that seems to be the case, I suggest you might want to double check your credit card limit before making any big purchases. Credit card companies have thirty days to notify you of any credit limit cuts. That means you might use your credit card for a purchase without realizing your limit has been lowered. You could end up being hit with extra charges and fees for exceeding your limit.
As the credit card companies continue to struggle to maintian their profit margin, you can probably expect to see credit get tighter and more expensive. You’ll proably also see more restrictions placed on the issuing of credit. As you can tell from their latest actions, credit card companies can “change the rules” to protect thtemselves whenever they think they need to. Just keep that in mind the next time you reach in to pull out that plastic.
If you are interested in eliminating your debt for good, check out Debra Moore’s Drop Your Debt Fast guide at www.dropyourdebtfast.com.
Tags: credit card debt, debt, debt counseling, debt elimination, debt relief, get out of debt, no more debt, payoff debt
October 24, 2008 at 2:59 pm |
Credit card companies also know that debt settlement negotiation is on the rise due to the fact so many people have fallen behind on their bills. The impact of the financial situation still looms at large, we will have t wait for the dust to settle and see which credit companies are still standing.