Credit cards and minimum payments
Let’s say you are lucky enough to get a new unsecured credit card. That means that your credit has to be somewhat stable, because credit card companies are no longer handing out credit like they used to. Now there is a rigorous intake process that sorts through applicants and notes those who are most likely to pay their debt on time and those who are most likely to default.
Once you get your credit, you run to the local store to make your first purchase. It could be something as innocuous as dinner for your family, or it could be a big-ticket item that you were waiting to put on credit. It may seem well and good for a while, but then your bill comes. For a lot of people it isn’t until their bills come that they realize the true relationship they have with their credit lenders. Though there is an immediate benefit, there is a long-term payout.
Credit card trends to be wary of
Credit is necessary in today’s market. If you ever expect to get a car, house or any big-ticket item, you have to have a decent credit score. However, now that lenders have been through the recession, they are changing their rules as to how credit is managed. Here are some new characteristics of credit cards to pay attention to:
- Credit rates will continue to rise. Surveys show that four of every five credit cards have the dreaded “variable rate.” Since the recession, those variable rates have been steadily on the rise. Coming 2010 the trend is expected to continue. Although regulators have managed to change the rules of minimum payments, it still may take consumers much longer to pay off debt if they stick to the minimum payment amount.
- Great deals are available, but beware. The credit cards with great deals are still going to be introduced to the market, but this time they come with some startling regulations. For example, Discover card advertised a 0% balance transfer deal that requires only two purchases a month. What was hidden in the fine print, however, was a hefty minimum requirement of purchases to be eligible.
- Fees are on the rise. In the past ten years fees for over-limit purchases and late payments have risen dramatically. It’s a chronic problem with credit cards from most major lenders. For example, Citibank’s Citi Simplicity card offers no late fees when users make purchases once a month. The catch is that if you do go over your limit, the penalty rate kicks in. That rate is well over 30%.
- Low-rate offers are also sketchy. Sure you may find a great low-introductory rate on a card, but there are many more ways for the lender to increase the fees involved. For example, Chase removed their cap on balance transfer fees for some of its lower-rate offers. That means that if you are transferring a substantial amount, expect to get the lower interest rate, but a higher fee. That fee may just about eat up any savings you got from the lower rate.
The future of credit is still in the lenders favor
Overall credit is still sided to benefit the lender more than the consumer. That’s nothing new in the world of credit, but it is projected to be worse than it was pre-recession. This time lenders are focused on bringing in as much cash as possible, as many ways as possible. They are making themselves ready to act quickly should future payment problems occur. Consumers need to be aware of the fine print and understand that benefits these days are not as transparent as they once were.