Credit Card Holders in Trouble - Who or What is to Blame?

The news is full of reports of escalating defaults - on home loans and also on credit card accounts.

Credit card issuers are seeing major losses through defaults, and as a result are raising interest rates, lowering credit lines, raising minimum payments, and adding fees in an effort to bring back their profits. In some cases, they're dropping credit card limits to less than a consumer's outstanding balance, triggering over-limit fees as well. This is a practice called "chasing down the balance" - but when they chase it to less than your outstanding balance it can cause serious hardship.

Are these adverse actions by credit card issuers really the result of cardholder defaults, or is the rising number of cardholder defaults the result of the credit card issuers' efforts to make more profits?

A credit card holder who was barely managing to make a monthly minimum payment of $100 is apt to miss the payment entirely when the minimum suddenly jumps to $150.

According to Bankrate.com, a study done by Synergistics showed that two-thirds of the respondents who received a change in terms had difficulty making payments as a result.

Credit card issuers say they will help. Cardholders having difficulty making minimum payments because of financial hardship should call. According to a Nilson Report, 2.7 million cardholders were afforded some kind of debt relief in 2008. This assistance included temporary forbearance, interest rate reduction, settlement, or a payment plan.

If you really are having difficulties, you should call. Numbers can be found on a web site called "Help With My Credit" and you can also find numbers on your card or your credit card statement.

But experts do warn that you should not make the call unless you really do need the assistance. Where once it was wise to call and ask for a lower interest rate just because you wanted it, now you should not.

Any request for a change will trigger a new look at your credit report and your credit scores. The card issuer may also ask for supplementary information, such as your income, job position, time on the job, etc. The combination of this information could trigger the adverse actions on your account that you were seeking to avoid.

The bottom line: keep up at least your minimum payments if possible, but if a change in terms pushes you beyond your abilities to pay, call and ask for help.


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