No, the government and Wall Street are not quite done with the mortgage crisis and lenders will continue to make it more difficult to get a home loan for the average borrower. But they have decided to add a new crisis to the overflowing plate of consumer issues: the credit card.

 

Along with gigantic mortgages, huge home equity loans and oversize car leases, consumers were quietly banging up their credit cards. Of course, you have to furnish the big house and park your Lexus in front of a fancy restaurant to truly be the Jones; you are trying to keep up with. So, the overall financial picture of the average Joe Jones is not pretty.

 

The government is now stepping up to the plate to regulate the credit card industry; which is a good thing. What has been forgotten [in the process] is the affect on the consumer as they increase this government watch. The credit card companies are doing what they can to set themselves up and do what damage control (or damage) before the Administration actually puts the play into affect come 2010-11.

 

Things such as increasing interest rates and fees are being rushed to the forefront of tasks, so please check your statement every month. In addition, I have received notice [from one of my credit card companies] of two changes coming just in time for the summer:

 

1.    International transaction fees will be charged on all purchases made by foreign companies, whether the purchase was made in or outside of our borders and in US dollars or in another currency. This means that those lovely shoes you buy in Paris will cost you an average of 3% more or the fabulous face cream you order from Italy and get shipped here will also cost you 3% more. Okay, this does not affect everybody out there, but it does cost the millions of Americans that travel outside of the states or say purchase drugs from Canada… Does that count too? This is simply a reminder to call your credit card company and see what their policies and fees are prior to using them. Capital One has always been the gem of cards that do not charge a transaction fee for purchases outside the US. Will they continue to do so?

 

2.    Cash advances will be severely limited by many credit card companies, after July 1. This means that once you have tapped out your Home Equity loan and are now trying to cash out your credit cards to buy food and other incidental, the banks are saying no more. The banks are limiting the percentage of the maximum total or dollar amount that may be used for cash advances. Now, I believe that this is a good thing, not tapping out your credit cards. However, the Cardholders should be given advance warning of this. The government agrees and part of the plan is better communication and notification to the consumer. In advance of government changes and regulation the banks are doing this. Your advance warning is: July 1, everything will change.

 

My last words of wisdom are as follows: do not call the card company get pissed off and scream close my account!! If a person closes a credit line, while still having an open balance, the debt to credit income becomes stagnant and it will have a negative effect on the FICO score. Simply do not use the credit card anymore, pay down the balance and then forget about it. Credit cards with long history count in our favor whether you use them or not. So don’t get mad, get even……switch to a different card with better terms or….don’t buy anything that you do not need! Think about how much money you can save by simply asking yourself if you really need that!

 

Dale Siegel