How To Cope With New Fees, Rules On Credit Cards

credit cards2Buried in your wallet is a credit card that’s older than the lava lamp in your rec room. You rarely use it, but you don’t want to close the account because that could hurt your credit score. Plus, it’s always nice to have an extra card on hand in case the one you regularly use is lost or stolen. Soon, though, that orphaned credit card could cost you money. Credit card companies are expected to implement a variety of new and creative fees to cushion the impact of a credit card reform bill signed into law last year. Under provisions of the law that took effect Feb. 22, card issuers can no longer increase interest rates on card holders’ outstanding balances.

Last week, the Federal Reserve Board proposed rules — to take effect Aug. 22 — that would prohibit credit card issuers from charging customers an inactivity fee for failing to make new purchases with their card.

That’s good news for infrequent card issuers. But the rules wouldn’t put any restrictions on credit card companies’ ability to slap an annual fee on your cards, says Bill Hardekopf, chief executive of Nor do the rules prevent credit card issuers from reducing your credit limits or closing your accounts.

How to cope with this changing environment? Some suggestions:
Use your cards
Even if you never pay a dime in interest, you generate revenue for your credit card issuer every time you use your card. That’s because merchants pay an “interchange fee” to card issuers when credit cards are used to make purchases. To cope with an expected loss of interest income, credit card issuers are looking at ways to reward customers who frequently use their credit cards – and get rid of those who don’t.

To avoid having your account closed, use all of your credit cards occasionally, says Kenneth Lin, chief executive of Credit Karma, a website that provides free credit profiles. Even small purchases, such as a tank of gas once a month, will make you a more valued customer in the eyes of the card company, he says. You may still decide to get rid of cards that add an annual fee. But this strategy allows you to decide which cards you want to keep. Read full article in APP.

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  1. It only affects it if you have balances on your other cards. If you cancel one card you lose that credit line and then your debt ratio will go up. If you consolidate the credit line over to another card you can close it with no affect at all. Or if you have a very low debt ratio then loosing some available credit won’t affect you. It just depends on each individual situation.

  2. Keep in mind: what this it does mean is, that you MUST stay on top of those cards you do use. If you use it, look out for the bill and pay it as soon as it arrives in the mail. if it fails to arrive FOLLOW UP with the CC issuer and make sure they have the correct mailing address on file. Failure to do so, will cost you ALOT more than your late fee, it can cost you any score you may have worked on for years to achieve.

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