The Credit Card legislation passed last month should ultimately help consumers. However, in the short term, many people are being squeezed. We have a combination of factors:
- banks attempting to shore up their financial statements by reducing the available credit on credit cards, home equity lines of credit, and business credit lines
- credit card companies seizing the opportunity to raise rates and fees while they still can
- far fewer 0% and low-interest balance transfer offers available
What does this mean to you?
If you are carrying any consumer debt or rely on a line of credit for emergencies, you need to keep an eye on it. You need to read all your mail from lenders and especially watch for changes in your terms including interest rate changes, shortened grace periods, reduced credit limits, or increased fees.
If you’re carrying balances and your interest rates are going up, take action.
- Come up with a plan to pay off the debt as soon as possible.
- Investigate competitor’s offers.
- If you have cash in excess of your needed emergency funds, go ahead and pay off the balance now.
If you’re relying on a home equity line of credit for emergency funds and it’s reduced below what you need, take action.
Start accumulating a cash emergency fund immediately. Here are 10 tools to do this. Long-term, it doesn’t make sense to be at the whims of creditors for your financial security. Cash in hand is the only way to ensure you can handle the unexpected without doing long-term financial damage.
Bottom line, don’t just ignore changes in your credit terms. You need to be a conscious credit consumer. Your best best is to avoid credit card debt all together. But if you are carrying some revolving credit, take steps to ensure that current lending conditions don’t do permanent damage to your financial future.