According to the most recent Federal Reserve survey, credit card companies have either increased interest rates or are planning to increase interest rates on 54% of customers with good credit. 74% of customers with poor credit have either had their rates increased already or will in the near future. This should come as little surprise to most readers, as the odds of being impacted by a rate increase are fairly substantial.
Along with interest rate increases, credit limit cuts are likely to impact a majority of Americans, as more than 50% of banks have cut or signaled that they will cut credit limits. For some, credit limit cuts are nothing more than an inconvenience. For others, it can devastate credit scores and rob them of the much needed safety net available credit can provide during rough times.
In the past, consumers who wanted to escape rate increases or mitigate the damage caused by a credit limit cut could apply for a new balance transfer credit card that offered a 0% rate to decrease interest expenses and increase available credit. Unfortunately, that has become a more difficult task, as 47% of loan officers say they have or intend to raise the credit score requirements for prime credit card applicants. For those who don’t fit the prime applicant profile, 53% of loan officers will be raising their rates.
Lastly, the issue of annual fees is popping up ahead of the implementation of new credit card laws, and while complaints about annual fees have yet to become widespread, 40% of banks reported that they had increase or will increase annual fees on credit cards. This last issue is likely to gain steam going forward, as annual fees are still uncommon on most Prime credit cards. A year from now, they may be a part of all credit cards.
The results of the Federal Reserve survey verify what many of us have experienced this year and, in regard to annual fees, point to changes we will likely see in the near future. So, as I’ve said many times before, try to pay down credit card debt as soon as possible to avoid even more credit card company induced pain.
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