If you haven't been paying attention to your credit card bills lately, brace yourself. The news isn't good.
Credit card profits are being squeezed by rising defaults and waning spending. As a result, issuers are tightening the screws on consumers.
Among the wallet-busting trends for cardholders: Interest rates are climbing, balance transfer costs are going up and rewards are getting harder to earn.
What's more, issuers have been tightening credit standards as the credit crisis in the banking industry drags on. That means people without good credit looking for new cards are having a hard time finding them, experts say.
Banks overall are hurting, so they are turning to all segments of their business to boost profits. At the same time, credit card delinquencies are rising, and people hit by the recession aren't using their cards as much.
"It's almost the perfect storm" for hitting up consumers, said Bill Hardekopf, CEO of the credit card comparison Web site Lowcards.com.
Take interest rates. In general, interest rates on mortgages and other loans are hovering at historical lows. Nevertheless, a growing number of credit card issuers have been raising rates.
"If you, as a consumer, do anything to show that you are a higher credit risk, you will almost surely be in for an increase in your interest rate or decrease in your credit limit," Hardekopf said.
Being late on a payment, missing a payment, exceeding the card's credit limit or using too much of the credit line can trigger an immediate rate hike, sometimes up to the so-called default rate of 30 percent or more.
But even customers with great credit who have never been late on a payment are seeing their rates rise, said Curtis Arnold, founder of Cardratings.com.
He said one of his co-workers recently had a rate increase on a card he hadn't used in years, one that even carried a credit balance.
"We've seen rate hikes over the years, but nothing like this. It's been unprecedented,"Arnold said.
On the fee side, the news isn't much better.
Not too long ago, 12-month, zero percent teaser rates on balance transfers were everywhere.
Today, the majority of balance transfer offers carry annual interest rates in the 3 percent to 4 percent range and are good for only three to nine months.
What's more, it's become the norm to impose a balance transfer fee. The typical charge is 3 percent of the balance.
Card companies also have been scaling back in recent months on freebies offered by reward cards, which earn points redeemable for cash, merchandise or other goodies such as airline tickets or hotel rooms.
Still, the changes haven't been as dramatic as the boosts in interest rates.
For example, adjustments are being made to the "tiered" rebate structure on the Discover card that will curtail the amount of cash rewards customers earn on annual purchases under $3,000.
The popular Chase Freedom card also is getting stingier, with some customers no longer being offered the hefty 3 percent cash-back on certain purchases.
Reward adjustments typically apply to new customers, but existing accounts can be affected, too. That's why it's good practice to closely review monthly statements and any notices the card company sends.
Some industry experts surmise one reason for the wave of credit card adjustments is that card issuers are moving ahead of pending reforms set to take effect July 2010 that ban "unfair and deceptive practices."
In the meantime, cardholders hit by higher rates or fees should contact their issuers and complain. If the card company won't rescind the changes, shop around for another card.
"There are still some good deals out there," especially for people with good credit, Hardekopf said.
Credit card-reviewing Web sites such as Cardrating.com, Bankrate.com, Creditcards.com and Lowcards.com can help with comparison-shopping.
Be aware that although the sites offer ratings and analysis, they accept fees from card issuers to prominently display certain cards.
(Patricia Sabatini can be reached at psabatini(at)post-gazette.com)
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)
With CREDITCARDSIDE, Must credit Pittsburgh Post-Gazette
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