Bad Credit Blues

Happy Holidays. Just when we enter the spending season, families are likely to see their budgets strained by another complication. The citigroup buyout is likely to cause a ripple effect that will get passed on to… guess who! … consumers!

Many major credit card companies will pass on costs by:

• Raising Credit Card Fees - Some companies may even impose a monthly fee on cards that did not have one before!
• Lower Credit Limits - Watch this one, because you may not notice your limit has been reduced, and can overspend it, and then of course, you will get hit again with a penalty. Ouch!
• Raising Credit Card Interest Rates - Keep an eye on your interest rates. Maybe it is time to transfer balances to lower interest rate cards if you can.
• Increasing the minimum payment - We are hearing that some credit card companies will raise the minimum payment from 2% to 5%. So if you run up a $2,000 balance over the holidays, and were expecting a $40 minimum payment, you may be unpleasantly surprised to see a $100 minimum payment!

Why are credit card companies doing this? For one thing, they fee consumer default. As the unemployment rate rises, they fear that more people will default on their payments. They also face rising costs, and have previous bad debt to make up for, so they seem to be doing a great job of passing those costs on to their paying customers.

What Can You Do?

You need to keep an eye on your credit cards. Almost every credit card has online access these days. Make sure you keep track of your statements so you know what your credit limit is, how much you have used of it, the interest rate charged, and any fees that also get charged.

And of course, try to have a frugal holiday season without running up a lot of debt if you can.

After the holdays, use our online debt payoff calculator to help you pay those guys off!