Consumer debt in the U.S. -- including credit cards and auto loans, but not mortgages -- hit a record high $1.98 trillion in October, according to the Federal Reserve. That's about $18,700 per household. The primary cause of bankruptcy is unmanageable credit card debt. Bankruptcy filings are up 30% for the twelve month period ending March 31, 2008 and Georgia is in the top 5 states. With the other scary things going on in the economy right now, the credit card companies are taking notice and are doing something to protect their liabilities.
As the availability of credit tightens nationally, the next hit could be the limit on your credit card. That’s especially possible if you tend to carry a high balance that’s close to the credit limit, pay only the minimum on your balances, make late payments or have a low-to-moderate credit rating, say consumer experts. So, it’s even more important than ever to pay off your credit card debts. In the terms and conditions of just about every credit card, it says that an issuer has the right to change the rate at any time for any reason as market conditions warrant. We all know that market conditions’ stink right now. The market is very rough, so it is happening and those who are using credit cards or even working to get them paid off in the debt snowball with Financial Peace, you are going to get hit and may not even realize it and it’s LEGAL for them to do it.
How many people look at every single thing that’s put into their credit card statement? Even if you make your credit card payments on time, the credit card bank can raise your interest rate automatically if you're late on payments elsewhere -- such as on another credit card or on a phone, car, or house payment -- or simply because the bank feels you have taken on too much debt. This practice is called the "universal default" clause and increasingly is becoming a standard clause in credit card agreements. According to credit card executives, the logic behind universal default is that the bank is not being unreasonable in raising rates when it has reason to believe that the risk of being repaid by the customer has increased.
If, like many Americans, you've been incurring credit card debt based on being able to afford the monthly minimum payment rather than whether your income and expenses can support the purchase of a particular item, you may be in trouble. For years, low monthly minimum credit card payments have encouraged us to spend more than we really can afford. Now it's time to pay the piper. Some national banks will soon be increasing minimum monthly credit card payments so they are closer to 4% rather than the current average of around 2%. Some major banks have already increased the minimum payments and others are about to follow suit. If you're the average American, with $10,000 in credit card debt, your minimum monthly payments are probably currently around $200 (2% of your balance). Under the new guidelines, sometime this year, your minimum payments may go up to as much as 4% of your balance, or $400 on a $10,000 credit card balance. If that's the case, will you be able to come up with the additional $200?
Fortune confirms that people have seen their interest rates skyrocket for no reason. The magazine profiled a man named John who had a card that went from 7% to 26% even though nothing changed with his financial standing. Bank of America, Citibank and Capital One are among the issuers who are jacking up rates in the face of a "continually changing business environment" -- which simply means "they’re doing it because they can." The Federal Reserve says that 37% of issuers have increased rates. And, Business Week reports that the dollars at risk with people who may not pay is greater in the credit market than in the mortgage market.
This is a consumer awareness warning that if you still have credit card debt that you need to be paying close attention to your statements and any other mail you get from them. They are not making these increases very visible, because they do not want you to shop around and change credit cards to get a better interest rate.
The only smart move is to pay your debt down or pay it off. If you are not sure how to do that, then you need the Financial Peace Program! We will start another program February 22 at Stockbridge Community Church. If you have already been through FPU and are working on your Debt Snowball, I strongly encourage you to get gazelle intense about getting your credit card debt paid in full!
As the availability of credit tightens nationally, the next hit could be the limit on your credit card. That’s especially possible if you tend to carry a high balance that’s close to the credit limit, pay only the minimum on your balances, make late payments or have a low-to-moderate credit rating, say consumer experts. So, it’s even more important than ever to pay off your credit card debts. In the terms and conditions of just about every credit card, it says that an issuer has the right to change the rate at any time for any reason as market conditions warrant. We all know that market conditions’ stink right now. The market is very rough, so it is happening and those who are using credit cards or even working to get them paid off in the debt snowball with Financial Peace, you are going to get hit and may not even realize it and it’s LEGAL for them to do it.
How many people look at every single thing that’s put into their credit card statement? Even if you make your credit card payments on time, the credit card bank can raise your interest rate automatically if you're late on payments elsewhere -- such as on another credit card or on a phone, car, or house payment -- or simply because the bank feels you have taken on too much debt. This practice is called the "universal default" clause and increasingly is becoming a standard clause in credit card agreements. According to credit card executives, the logic behind universal default is that the bank is not being unreasonable in raising rates when it has reason to believe that the risk of being repaid by the customer has increased.
If, like many Americans, you've been incurring credit card debt based on being able to afford the monthly minimum payment rather than whether your income and expenses can support the purchase of a particular item, you may be in trouble. For years, low monthly minimum credit card payments have encouraged us to spend more than we really can afford. Now it's time to pay the piper. Some national banks will soon be increasing minimum monthly credit card payments so they are closer to 4% rather than the current average of around 2%. Some major banks have already increased the minimum payments and others are about to follow suit. If you're the average American, with $10,000 in credit card debt, your minimum monthly payments are probably currently around $200 (2% of your balance). Under the new guidelines, sometime this year, your minimum payments may go up to as much as 4% of your balance, or $400 on a $10,000 credit card balance. If that's the case, will you be able to come up with the additional $200?
Fortune confirms that people have seen their interest rates skyrocket for no reason. The magazine profiled a man named John who had a card that went from 7% to 26% even though nothing changed with his financial standing. Bank of America, Citibank and Capital One are among the issuers who are jacking up rates in the face of a "continually changing business environment" -- which simply means "they’re doing it because they can." The Federal Reserve says that 37% of issuers have increased rates. And, Business Week reports that the dollars at risk with people who may not pay is greater in the credit market than in the mortgage market.
This is a consumer awareness warning that if you still have credit card debt that you need to be paying close attention to your statements and any other mail you get from them. They are not making these increases very visible, because they do not want you to shop around and change credit cards to get a better interest rate.
The only smart move is to pay your debt down or pay it off. If you are not sure how to do that, then you need the Financial Peace Program! We will start another program February 22 at Stockbridge Community Church. If you have already been through FPU and are working on your Debt Snowball, I strongly encourage you to get gazelle intense about getting your credit card debt paid in full!
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