Credit card use is declining
With the credit meltdown of last fall and all the fallout in the business since then, it was only a matter of time before you’d get a letter from your credit card issuer phrased something like this.
“We’re notifying you that the terms of your account are changing.”
The Hodges house got one of these from Capital One this past week. It’s a Visa with no balance, and we don’t use it any more (part of the credit card purge we and many others have done). The old annual percentage rate (APR) was 12.65 percent for purchases and a 19.74 percent rate for cash advances.
The letter advised us of a new rate at 17.9 percent for purchases and balance transfers. As with many deals, it’s adjustable and is essentially 14.65 percent added to the prime rate. The default rate, which is triggered when your payment is late twice in any 12 billing periods, will be 29.4 percent.
It was the rationale that got my attention.
“Due to extraordinary changes in the economic environment, we’re reviewing our existing credit card accounts,” the letter stated. It is my guess that millions of these letters are going out right now as the banks and other card issuers retrench to cut losses and get their finances stabilized.
Notice, too, that credit card offers in the mail and pitches for lines of credit have just about dried up. We would get at least one a day when business was booming. Also, there seem to be fewer Capital One ads on TV. I personally liked the barbarians pillaging the town and asking “What’s in your wallet?”
Seriously, though, if you ask shoppers now that same question, the answer is probably “cash.” One impact of the recession shockwave is people trying to save their money and not live on plastic. If you want a wide-screen TV or a new riding mower, save up for it and pay cash. That’s the advice of many financial experts and the best way to break the hold that consumer debt has on the household budget.
If you still have card balances you owe, chances are your account is headed for change as part of the credit card industry’s lockdown. A rate increase could be in your future, along with other revisions in terms.
If that’s the case and you’d like to talk about your experience, your business editor would like to hear about it. The Democrat is looking to get a conversation going on this at Tallahassee.com and plans some additional coverage.
http://www.tallahassee.com/article/20090307/BUSINESS/903070322/1003
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