The write-downs of credit card debts soared in February. Credit card charge-offs hit 8.82% in the same month, representing a continued climb over 6 months in the face of job losses. But what does this all mean for future credit card lenders’ policies on those who revolve credit card balances from month to month?
The article concludes with the line,”‘Looking ahead into 2009, we expect that the implementation of yield-enhancing actions by issuers will be the primary tool that mitigates erosion of excess spread,’ Moody’s said.”
Look to credit card lenders moving forward to:
- Start charging an annual fee on cards that didn’t previously carry one.
- Increase the monthly minimum payment required on the card to revolve any outstanding debt
- Reduce limits on credit lines without requesting approval from cardholders
- Hike up interest rates
On the housing side, be alert for the elimination of one’s HELOC with little notice.
With debt, coming up with a contigency plan is key. If an annual fee is suddently heaped onto your card, consider dropping the card altogether — a fee is yet one more reason to stop using it cold turkey. If you use debt stacking or any variant of the snowball method to pay down debt, then make sure your plan takes into account any increases in required minimum payments. Check and reconfirm minimum payments each month long before the payment deadline. And avoid using automatic billpay systems for your credit card statement if you’ve programmed it to send in the monthly minimum. Changes in the minimum payment structure can cause underpayment and thus more fees and other penalties.
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
