Between January 2007 and January 2009 credit card defaults increased by 75 percent, sending many credit card companies into a panicky frenzy in an effort to avoid the slew of bankruptcies caused by massive foreclosures in the mortgage industry.
What They're Doing
Plain and simple, credit card companies are cutting limits, increasing rates, increasing monthly minimum payments, instituting new monthly/annual fees and even canceling credit cards of customers who are considered inactive. Inactive credit card users are considered risky because they assume that they will use the credit card in case of an emergency such as a job loss
. Credit card companies do not want to take the risk of being the fallback "income" for customers who experience job losses.
If a customer's credit line is decreased it can negatively impact their credit score. Also, for those who are living on a very tight income or even worse, beyond their means, changes in credit card terms can send them into financial crisis. For example, an increase in monthly minimums may make repaying the card unaffordable.
What You Can Do
- Pay down your credit card balance to $0. It's getting very crazy out there and many companies are cutting even the most productive workers. You don't want to be caught jobless with a high credit card balance.
- Keep your credit card active. After you pay down your balance to $0, make sure you keep the card active by buying something small on credit each month and paying off the balance immediately.
- If you are hit with an interest rate increase, inquire about paying off your entire balance at the older/lower interest rate.
- Keep an eye out for "changes in terms of service" on your credit card. Look at every sheet of paper included in your credit card statement each month, even if you pay your bill automatically online.