Banks Plan to Squeeze Credit Cards – New Fed Survey
A new survey by the Federal Reserve confirms what many have been expecting: Banks and credit card companies are tightening credit available to consumers while adding more fees and higher interest rates.
Yesterday, the Fed released a survey of banks from across the country on how they are handling credit cards. From the New York Times report:
About 50 percent of the banks responding to the Fed’s survey said they were increasing interest rates and reducing credit lines on borrowers with good credit scores. About 40 percent said they were imposing higher fees. The banks also said they were demanding higher minimum credit scores and tightening other requirements.
In short, credit will be harder to get, and consumers who can get credit will be paying more.
But what raised the ire of Congress, and led the House to send a new bill to the Senate speeding up the enactment of new laws, are the ways in which credit card companies are going about raising rates and fees. From the same NYT story:
A study by the Pew Charitable Trusts, released late last month, concluded that the 12 largest banks, issuing more than 80 percent of the credit cards, were continuing to use practices that the Fed concluded were “unfair or deceptive” and that in many instances had been outlawed by Congress.
We’ve seen many anecdotal reports on these practices. New outlets and bloggers across the country reported seeing overnight rate increases, closed accounts and new fees. Now, thanks to the Fed survey, we know that banks will continue to go down these paths.
So what can you do? Continue to read your credit card bills and reports closely. Be on the look out for rate changes and new fees. If you don’t understand your statement, find a friend who can help you or contact your bank.