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In the past few months, we've had one credit card raise our interest rate by five percent and another lower our limit by $13,000. We've never missed a payment and never paid less than the minimum amount due on either of these accounts. We're the good guys -- but that doesn't seem to matter right now. What can a family do to protect its credit in times of uncertainty?
First off, know you're not alone. I spent a good fifteen minutes ranting and raving when I got the e-mail telling me my business account card's limit had been slashed by 2/3. I wanted a horse head in American Express's bed. My husband, ever the rational one, showed me this:
The pace of deterioration in the company's credit card portfolio surpassed that of peers in 2008, given the heavier exposure to borrowers in California and Florida, outsized portfolio growth in 2006 and 2007, and the inclusion of a higher-loss small business portfolio.
My opinion on that? Wah, wah, sobcakes. Unfortunately, credit card companies have bigger fish to fry right now, and their sympathy level for the small guy is at an all-time low. However, there are things you can do if you're on the receiving end of one of these letters.
According to Jennifer Openshaw:
So here's what to do.
* Call an agent. Pick up the phone immediately and find a live agent willing to explain the changes.
* Get a comparison. Have the agent clarify what changed, not just what your card's terms are today or after the change. If your effective APR went from "prime +14.08 percent" to "prime + 17.99 percent," have them explain that and also what the resulting rate actually is. For any fees changed, ask them what the new and old fees are. Have the agent do an example if necessary to illustrate total cost.
* Be persistent. When the agent is done, ask if there's anything else you should know. I found out that the "penalty period" for the higher-default APR if I miss a payment had increased from 6 months to 12 months -- hard to find in the fine print, and it didn’t come with the first explanation.
* Pay your balances in full and on time. The adverse changes only applied to balances carried and/or a late payment; if I pay in full and on time I won't be affected. You might consider setting up auto-pay to avoid late payments.
* Ask for the good news. These changes all sound like a takeaway; less benefit, more cost. However, my issuer also offered attractive balance transfers, 5 months for 1.99 percent with a 3 percent transfer fee; 3.99 percent for 10 months. Some issuers may offer other benefits, anticipating negative customer reactions from changes in terms.
When I called Capital One and asked about my rate increase, they told me I didn't have to agree to it. I could forgo my right to charge any more on the card and pay the remainder of my balance at the original (very good) rate. So that's what we decided to do. Yes, we can't charge any more on that card, but we opened it only for balance transfer purposes in the first place. The rate was really good. Ask for this deal if all you're trying to preserve is the ability to pay off your debt at a great rate and you're not interested in new spending.
I also discovered in the heat of my passion that I could combine credit limits on two cards with the same company and pay using the lower interest rate. Apparently, closing cards is a bad idea because it negatively affects your credit score -- which, I know, is so stupid, right? If you're paying off cards and getting rid of them, one would think that's a good thing. But hey, I don't make the rules. So if you have a card with no balance that's just been hanging out in your filing cabinet, like I did, see if you can make it do some good work for you and transfer your balances away from the cards that are giving you a hard time. I won't be closing any cards any time soon, but I am going to make myself a very expensive customer to maintain for any card messing with me after I've been
