Are Credit Cards Changing for the Worse?
Aggravating New Credit Card Trends
In the past, we’ve talked about how some people are noticing their grace periods being reduced and we’ve talked about the universal default provisions that credit card companies are now implementing into their policies, but it’s not until you look at the big picture that you realize credit cards are seriously changing, and not for the better.
The Grace Period Factor
Many of us have noticed that the grace periods for our credit card bills have become shorter. What many don’t realize is that this is an industry-wide trend and not a few isolated cases. Ten years ago the industry average for credit card grace periods was 27 days. Today, it’s 20 days and some credit cards aren’t offering much of a grace period at all.
Increases in Late Fees
It’s bad enough that a late fee is imposed when your credit card payment arrives late and that your interest rate goes up, especially when many credit card companies seem to take measures to ensure your payment is recorded as being late. But when you add that to the fact that late fees have almost tripled over the past ten years, the entire situation becomes downright infuriating.
Universal Default Provisions
We may be able to look at the grace period factor and the increases in late fees and just assume that the credit card companies are doing what they have to in order to remain profitable. But then comes the universal default provision most credit card companies are using and you have to wonder who the credit card companies are really out to serve -- their cardholders or themselves?
In the good ole days, you would make your credit card payments to your credit card company on time each and every month and the credit card company would view you as a valued customer – regardless of how you paid your other creditors. Nowadays, that’s no longer the case.
For example, you could pay ABC Credit Card Company on time each and every month and make one or two late payments to XYZ Credit Card Company. ABC Credit Card Company happens to pull your credit report and sees that you’ve been paying XYZ Company late. ABC Credit Card Company then increases the interest rate they’ve been charging you even though you’ve never made a late payment to them in particular. Doesn’t seem fair does it?
Play to Win
If you have any hopes of winning the game credit card companies are playing, you’re going to want to implement a few sound practices. First, get online billing statements from your credit card companies and then make the payments online as soon as the statements come in. This way you’ll avoid being hit with late fees due to the decrease in grace periods. Then, make sure you pay each and every one of your credit card companies on time each and every month so no one can implement the universal default provision on you. Then, hopefully, you’ll have a chance of staying ahead of your credit card companies.
Comments
Or, stop using credit cards entirely! Americans are in a bad habit of carrying a boat-load of debt they don't need to. Pay off your credit cards, then use your savings to purchase things instead of credit. Your money will be earning interest for you, rather than your debt earning interest for someone else. It may take a little discipline to get there, but it's the only way to get out of the unhealthy debt cycle.
Posted by: Doug | August 22, 2006 11:48 AM
It's really disheartening to read about these changes. I've always been the type to pay my cc's in full each month, so these changes don't impact me as much.
I like electronic payments - no, not having the cc company withdrawal money from my bank account (although I suppose that's pretty handy), but having my bank send an electronic payment to my credit card. I just prefer my bank to initiate payment and not have my cc company have direct access to my bank account.
It's their game, and we have to play by their rules. If, in the example above, they raise our interest rate because the other cc company received a late payment from us, we as good customers to the first company might be able to threaten to leave if they don't reduce the rate.
Remember, there are lots of cc companies out there. If we are good customers, we can take our business elsewhere.
Posted by: www.Auction-Misspellings.com | August 23, 2006 10:57 PM
I am one of those people who are caught in the ever increasing onslaught of higher and higher insterest rates on my credit cards; due to being out of work and having taken a very low paying job to put food on the table and roof over my head. The latest increase was to 35% on a card I was late.
Posted by: mms | August 25, 2006 11:16 AM
Most credit card companies will let you set up automatic payments through your bank. They will then deduct your payment each month on the date it is due. That will eliminate any chance of your payment being late so you will never have to worry about a late fee or service charge. My bank does not charge for this service. I simply note on my calendar the amount that is due on each card on the date that it's due so I can be sure and transfer enough funds into my checking account to cover the payment. That way you don't have a problem being late in case your computer is down or there is a problem with the credit card web site. For any credit cards that won't take automatic payments they allow you to schedule your payment in advance through their web site. I have my payment sent on the due date and follow the same procedure for noting it on my calendar. That way I can take care of it as soon as it comes in but I can keep my money in my savings account until I need to pay the bill.
Posted by: Ginny Frost | August 26, 2006 10:35 AM