Banks Tightening Lending Standards on Credit Cards
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by: barrywaters
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The recession may change the way both banks and consumers deal with credit cards. Similar to the rest of the lending industry, banks are responding to the credit crisis and tough financial times by adopting stricter practices regarding credit cards. They are decreasing credit limits, increasing interest rates and closing accounts that have been inactive too long. In fact, some customers whose accounts are current have even had their maximum credit amount lowered. 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. Banks may even cancel some credit cards that have been inactive for over 12 months. Your credit score can be impacted by changes in the maximum limits allowed on your credit cards. Almost a third of your credit score is based upon how much of your actual credit limit you have utilized. Your percentage of debt will increase, if your limit is lowered. That could, in turn, negatively impact your credit score. 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. That means that a lot of consumers with credit cards will be affected by the new restricted lending standards of banks. You can contact your credit card company if you are notified of credit limit or interest rate changes. If you make your payments on time and historically carry little balance, it is likely the bank will restore your old terms. You do not stand a good chance if your account is not in good standing or you carry a large balance regularly.
The most financially beneficial way to use a credit card is to pay it off each payment period. 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. Start by paying more than the minimum amount each month. 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 may wish to transfer debt from higher interest credit cards to one with a lower rate. Do not wrack up more debt, even if you have a lower interest 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. Try this Credit cards for bad credit Credit cards Credit card application Bad credit credit cards Credit cards
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