What credit card companies can and cannot do to your account

[Joanne98]

Almost every day Wallet Pop gets questions about what may appear to be illegal actions by credit card companies. Unfortunately, in most cases the credit card companies can get away with closing your account, changing your interest rate, dropping your credit limit and changing your rewards programs, provided they give you proper notice. Bill Hardtop, CEO of Low Cards.com discussed by email some of the key questions people ask about current credit card company practices.

Whether or not a company can make changes in your credit card account depends on the fine print that you probably never read in the terms and conditions. They can make changes to these terms at any time as long as they notify you. Most times changes are mailed as an insert in the monthly bill. Sometimes, you'll get a special mailing. When you get something in fine print from a credit card company don't just toss it. Read it and call the company if you need explanations about what you are being told about possible changes to your account.Here are some key things that can be changed with proper notice

Can they change my fixed rate to a variable rate?

Yes. The issuer can switch the rate from a fixed to a variable rate even if the original offer said the rate was fixed for the life of the balance. "Some issuers recently angered their cardholders by switching cards from fixed to variable rates. Some cardholders signed up for a card based on the fixed rate for the life of the balance," Hardekopf wrote. "They discovered that this was conditional. Issuers probably changed this because the Credit CARD Act requires that interest rates on new accounts must remain fixed for a year unless the cardholder does not pay the bill. Issuers don't want to be locked into that fixed rate, so they switched the cards from fixed to variable to give themselves more freedom in raising rates, even after the regulations go into effect."

Can they change my rewards program?

Yes. Some issuers are changing the rewards structure for some cards to cut costs. American Express reduced the amount of cash you can earn from 1.5% to 1.25% on most purchases. Chase created Ultimate Rewards with a less-generous rewards program to replace its popular Chase Freedom card. Capital One has notified some cardholders of a new points program that starts in November that has slightly lower rewards on a number of tiers.

Can they close my account?

Yes. Issuers are closing accounts as a way to reduce their own lending risk. Unlike rate increases, issuers do not have to notify you before they close your account. Some issuers state in their terms and conditions that they will not be responsible for the consequences from closing your account. "Some issuers are closing accounts due to inactivity. Right now, credit lines are very important, even if you aren't using them. They can be good for your credit score. To show account activity, use your card once a month on a small purchase and then pay off the balance completely at the end of each month," wrote Hardekopf.

Can they increase my minimum payment?

Yes. Chase recently increased the minimum payment from 2% to 5% for many of its cardholders. In the long run, this is good for cardholders because the more they pay toward their balance, the faster they pay off the card and the less they pay in interest. However, this is bad timing and a financial blow for many households who are struggling to pay the bills right now. "If the increased minimum fee pushes you over the financial cliff, contact your issuer to work out a payment plan," says Hardekopf.

Can they cut my credit limit?

Yes. A recent FICO study says that credit card issuers cut limits for an estimated 58 million cardholders for the twelve months ended in April 2009. Issuers can also increase or cancel your credit line, or the balance transfer or cash advance portion of your credit line.

Can they increase fees any higher?

Yes. Issuers will probably continue finding ways to increase rates and fees. In June, Bank of America recently increased the balance transfer fee from 3% to 4%. Chase followed in August with an increase in the balance transfer fee to 5%.

Can they increase my rate because I defaulted on another credit card with another issuer?

No. This is Universal Default and it is banned under the Credit CARD Act. Issuers must only focus on your payment record with their particular card.

Can they force me to accept a higher interest rate?

Not any more. The CARD Act now requires issuers to give a 45-day notice before a rate increase. This gives cardholders time to opt out, and close the account at the current rate. Keep in mind that this forfeits rewards and points, so use those before you close the account.

Can they force me to keep paying the higher rate as long as possible?

Continued>>>
http://www.walletpop.com/blog/2009/09/11/what-credit-card-companies-can-and-cannot-do-to-your-account/

[dkf]

1. Moral of the story: Pay off your credit card bills ASAP.

The banks will find a way to make money somehow, they have to make up for all the defaults.

Its a bad time to owe money, especially on something where terms can be changed.

[morillon]

2. Doesn't the Universal Default clause go into effect in February?

The CARD act has two phases, one that took effect in late August and another that will be effective next February. I thought Universal Default wouldn't become illegal until February.

UD's a nasty thing. The sooner it's illegal, the better.

[Hawkowl]

3. Stop paying

If the CC company raises your rate to 30%, doubles your minimum payment, and changes your due date to snare you in late fees--STOP PAYING.

If everyone simply refused to put up with this legal larceny then it would stop. The banks need your money and you have more leverage to negotiate than ever before.

[Name removed]

4. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Occulus]

5. Well, isn't that special.

Yours has mushrooms.

[sarge43]

6. Tombstone in 10, 9, 8 ..... n/t