Someone's in trouuuble. Is anyone else reminded of elementary school days and getting called into the principal's office?
President Obama is meeting today with senior executives from fourteen of the top credit card companies — including Bank of America, Citi, Amex, Visa and MasterCard. This meeting coincides with action in Congress to push forward a new Credit Cardholders' Bill of Rights to trump the reforms coming in July 2010. According to the Washington Post:
"The President believes new rules of the road for the credit card
industry are needed and he looks forward to having an open and
productive conversation tomorrow with the representatives of the credit
card industry about the impact of the current crisis on consumers,"
Obama aide Valerie Jarrett said in an e-mail sent late yesterday.
It will be very interesting to see how the credit card companies respond after the meeting concludes. Will we see a slow down in the interest rate hikes and credit limit cuts that have dominated the credit card industry this year? Or, could we see even more of these changes as the credit card companies scramble to prepare for upcoming reforms?
Either way, the credit card companies' "come to Jesus" meeting should also be a wakeup call for consumers. The only way to use credit card responsibly in this economy is to not carry any kind of balance at all. If you pay your bill off in full each month, your interest rate doesn't matter because you won't pay interest charges. And using your cards for only small amounts helps ensure that you'll have a healthy debt utilization ratio even if your credit limits are cut.
This isn't going to be easy. It's a major shift in how Americans traditionally use and rely on credit. And it comes at a time when money is tight to begin with. But these changes in spending are possible. You can get started with our do-it-yourself debt reduction guide and our credit card repayment calculator.
Emily Peters – Credit.com's personal finance expert and former TransUnion credit bureau insider. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.
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When was the last time a credit card benefits the consumer? The very nature of their existence is allowing you to spend money you don’t have so long as you pay it back. If you can’t pay the balance, you’ll get charged interest, so anything you bought now costs you more than you paid for it. The rates can change whenever they want because it’s not a loan but rather variable rate credit. It’s better to just avoid using them, period. If you pay for stuff with your own money, you don’t need to rely on credit. This is your major shift in America, figuring out they don’t need to use and rely on credit.
The credit card is quickly becoming the financial equivalent of a cigarette.