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We may be in for a bit of turmoil. The  credit card  issuers who for years, did pretty much whatever they wanted without moderation are not too excited about the new upcoming changes. They have warned, that if the bills go through, we will all regret it. We have about nine months before these laws take hold, so until then it’s the wild west.

The benchmark prime rate which all others are based upon has fallen.  The last year has seen a record drop of 2% to 3.25%. So one would naturally assume that credit card rates have also fallen.  Wrong. Over the last year, the rate for credit cards has went up almost 1%. Now that the credit companies and banks are soon to get squeezed by Obamas new laws,  expect them rates to go even higher.  The big banks are under a lot of pressure to make a profit and stay afloat themselves,  so they are not going to be cutting consumers any slack.

Banking and Credit card  fees

The big banks and credit card issuers make a ton of money from fees. Late fees, balance transfer fees, foreign transaction fees, cash advance and ATM fees, yearly fees, and of course the “just because we feel like it fees. Watch your billing statements carefully. Compare them with credit card statements from past months and years. You will likely see some new and/or increased fees added. As the credit crunch and recession continue, the big banks make more and more money from adding on fees. So be alert, and read the fine print. A few of my cards seem to be changing the terms almost daily and I don’t think this is a rare occurance.

Rewards are dwindeling

You favorite cashback reward,  or airline miles card may soon be giving you the finger. The intense competition we have seen in past years for customers seems to have dissipated and the banks all decided in tandem to tighten the screws. The days of receiving a ton of zero percent interest rate offers in your mailbox are also going by the wayside.  Once again check the fine print. Read your constantly updated terms and be informed or you may be in for a nasty surprise when you find out that you no longer receive as many miles or rewards as you previously did. The whole industry is in turmoil after the big bank bailouts and there are likely more changes to come as banks figure out ways to recover from staggering losses and upcoming credit reform laws.

The best plan of action is education and comparison. Compare as many different plans and offers as you can find and don’t be shy to drop one and pick up another. The phone is also your friend, use it. Don’t be shy about calling up your lenders and asking about fees and interest rates on your account. They will still often drop or reduce fees or interest rate hikes. They make a huge amount of money because of the average consumers complacency and laziness or fear of dealing with such matters.  When they try to pull a shady maneuver, call them on it.  The worst thing you can do is sit idly by and watch your hard earned money go towards another huge bonus for the bank CEO’s and executive staff.

Yes, I know, it sounds crazy and against all that banks believe in, but sometimes credit card companies and banks will actually forgive a portion of a consumers outstanding debt. The big banks know that in some situations ‘a little’ is better than ‘none’. In extreme cases, banks have forgiven up to 70% of credit card debt in exchange for complete payment of the remaining 30%. Nothing is static in these volatile times we are living in. Once again, calling and discussing your options directly with the banks can be beneficial.

Is Credit card debt forgiveness good idea?

Sounds wonderful doesn’t it? The downside is that credit card debt is never forgotten. You can consolidate credit card debt and negotiate for forgiveness on some of it, but banks will surely make a note of this on your credit report. This type of debt consolidation or debt reduction will always be reported as non-payment and will of course stay on your personal credit file for many years.

Who can consolidate debt from credit cards using loan modification?

For the most part, this drastic plan to consolidate debt and reduce liabilities is only for those who have no income and have not paid their bills in many months. If it looks like you can still make some payments then banks will likely want you to just keep paying and milk your account for long term interest charges and fees. These loan modification agreements are in the banks best interest, not yours, so they will pick and choose when to negotiate. Credit counselors can help assist you in these credit card debt negotiations but beware of huge fees and percentages added to the total. You might be surprised at how well you can negotiate your own loan modification program and the experience will teach you a lot about the whole process which can help you to consolidate debt in the future.

So what exactly do the new credit card reform laws mean to me?

For the short term, they mean more shenanigans and tomfoolery from the big banks and credit card companies.  The heavies in the credit card industry are not happy about these new laws.  The laws don’t take effect for some time and until then, you can bet credit card issuers will do everything they can to make more money and improve the bottom line.  With the big bank bailouts and overall credit crunch that comes with a recession, there is a huge amount of bad debt on the books.  Tons of people missing payments and loans going unpaid.  Now we add the further restrictions of a wide ranging group of new credit card laws and the banks are getting nervous.  We all know what direction the brown stuff flows,  so its an easy guess to know who is going to pay more.  We are.  The next 8-12 months will be full of fees, interest rate hikes, and credit limit chopping as the big credit card companies scramble in the remaining days of wild west lending practices.

Credit card limits and perks

One obvious way the big boys will reduce exposure to bad debt is by reducing credit card limits.  The people who have plenty of money, or a steady job and good money management skills will not be affected too much.  The people who for whatever reason make a late payment once or twice, or run up balances too quickly, or set off any of the unknown and known  ‘flags’  will be immediately put into the ‘high risk group’ and may see their credit limits drop without warning.  Credit card companies are on edge,  nervous, and quick to excite.  It doesn’t take much these days to get your name thrown into a pile of other questionable credit consumers.  There have even been some reports of people with excellent credit who pay their balances each month  getting credit limits axed.   So if they see you as a risk, or as safe but not making them much money, you might be saying ‘bye-bye’  to your current high credit limits.

The days of getting flooded with zero percent interest credit card offers and other perks have been on the way out. Your favorite mileage card or ‘cash-back’ card could be changing the policy any moment.  In fact, many cards have been changing policies almost weekly.  Reducing, or completely doing away with the great perks and advantages like earning miles.  The whole credit card and banking industry is in crisis mode so expect this to be a tumultuous time.

Watch your Banking and Credit card fees – be alert

It is no big secret that banks make money from fees.  They are not just giving us money to use because they care so much about us.  These fees for the last few years have become quite nasty and downright sneaky.  The golden rule is “Watch them like a hawk”.  This of course, is easier said than done.  Who has the time to read the constantly changing policy statements and dig out the magnifying glass and to  separate the interest charges from the add on fees?  Not me, and likely not you either.  You just do your best, and always be watching for changes.  When the new laws take effect this process should become much easier.

I will be going  into more detail about what exactly is in the new credit card laws over the next few weeks and months, but for now here is a sample of the changes:

• Protection from quick,  sudden interest charges,  and from increasing the interest rate in an accounts first year or on already existing balances.

• Banning the sneaky  “two-cycle billing” method.  Basically if you completely pay your balance one month, but not the next month, the crooks calculate the interest based upon both months.

• Give consumers more time to pay the credit cards.  Statements must be received 21 days before the payment is due.

• Ban another sneaky practice of applying payments to lower interest rate charges first while the higher interest rate balance goes untouched.

• Require a 45 day advance notice of upcoming interest rate increases.

So as you can see, it’s all a nice step in the right direction and it will eventually improve in the consumers favor, but until this happens you need to stay vigilant and alert.  There are a few things you can do in the meantime.  First of all, don’t be shy.  Pick up the phone and call the credit card company if you see any strange fees,  interest hikes,  or credit limit changes.  Complacency is the banks best friend. Most people never question or call them and the ones who do are often rewarded with lower rates and better terms.  If this doesn’t  work,  then don’t  hesitate to move your  balances and accounts to another lender.  As consumers, we have the power to shop around and take our business elsewhere.  I know when I was working fervently to get out of deep credit card debt I changed credit cards all the time and always moved from a higher rate to a lower rate.  The worst thing you can do is to just watch them take advantage and collect huge fees, and charges.