When Credit Card Companies Change the Rules

If you're like a lot of folks, you may have just received a "Dear Valued Customer" letter in the mail from your credit card company. No, you aren't being fired, but it might feel like it.

If you have an affiliate card issued through one of the big banks, it starts like this: "This challenging business climate has led Citibank, the issuer of [XYZ] Gold MasterCard ... to notify us ... they are making changes to the terms of many Citibank credit card offerings ... including the [XYZ] MasterCard product."

Uh-oh. Here it comes.

The enclosed material, one of those multipage fine-print deals, starts off with "The Changes." It tells you that the APR, minimum-finance charges, transaction fees for foreign purchases, and "other fees" have changed, and that "supplemental pricing information" appears in "...your new card agreement [which] follows this notice."

Changed from what to what? Unless you have the last version of this document handy, you probably won't know what or how much. Like too many things in personal finance, you don't know what you don't know.

You'll find a lot of these changes these days. First, because of the banking crisis, cash-strapped banks are scrounging for cash wherever they can. Second, new federal legislation that takes effect in 2010 bans universal default, double-cycle billing, and a host of other evils. That's the good news. The bad: This is driving banks to get ahead of the potential $12 billion in lost revenue.

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.

Protecting what you have and knowing about change are important in managing your credit and your finances in general. And incidentally, the banks and card issuers that do these changes well — raising cash without angering customers — stand to come out ahead.

Jennifer Openshaw, author of "The Millionaire Zone, is co-founder and president of WeSeed, whose mission is to enable people to discover the stock market in their everyday lives through their passions, their fashion, their careers, their kids, and the brands they know and love. Her empowering advice, which helps everyday Americans do more with what they have, has been seen on Oprah, Dr. Phil, The Today Show, CNN, CNBC, and Nightline. You can reach her at jopenshaw@weseed.com.

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