Banks Tightening Lending Standards on Credit Cards
View PDF | Print View
by: barrywaters
Total views: 130
Word Count: 564
Owning credit cards during an economic downturn might look very different than it has the past decade. Like mortgage lenders, banks who offer credit cards are tightening their lending standards. They are decreasing credit limits, increasing interest rates and closing accounts that have been inactive too long. Many banks have already decreased credit limits for consumers in good standing. Customers who are considered subprime have been hit the hardest though, as over 50 percent of them have had their credit limit decreased. Banks are examining credit reports and reviewing credit scores for consumers who have existing credit cards with them. They can modify the terms, limits and interest rates for a current customer they feel might be a credit risk. For those who only pay the minimum required each month, an increase in rates could mean higher payments. Credit cards that have had a zero balance for a year or more are at risk of being closed altogether. Your credit score can be impacted by changes in the maximum limits allowed on your credit cards. A large portion of your score depends on the percentage of debt you carry when compared to your maximum allowed limits. That means that if your credit limit is decreased, the same balance you had on a higher limit now uses up a larger percentage of your limit. Your credit score could consequently be hurt. If you had a card you did not use for a long time that was cancelled by the bank, it could impact your score too.
An estimated two thirds of consumers who own credit cards in this country have an outstanding balance. This translates to a large number of consumers who will be directly impacted by any changes banks make regarding credit cards. You can contact your credit card company if you are notified of credit limit or interest rate changes. If you are in good standing and have a record of low balances relative to your limit, you have a very good chance of convincing the company to give you back your original rates and limits. You do not stand a good chance if your account is not in good standing or you carry a large balance regularly.
It is always best to pay off your balances in full each month. It is important to be aware of the conditions and rates for credit cards on which you may presently carry a balance. Pay attention to any new notices you receive regarding those credit cards. Your first goal in the New Year should be to tackle those carried balances. The best way to reduce debt is to make more than the minimum required payments. When possible, make cuts to your budget so you can put those funds toward your outstanding balance. If you have debt on more than one of your credit cards, most people find it easiest to focus on the card with the lowest balance first. You can also shop around for credit cards with lower rates to which you can transfer balances from higher interest cards. If you do open a new card with a lower rate, do not spend more on that card. Keep making payments on that debt until it is paid off. The freedom of being debt free will be worth all your hard work.
About the Author
Similar articles about student credit cards, see a cool site.
Rating: Not yet rated