Re-thinking Credit Card Choices (Part 2)
Written by Mike Killian
Posted On: February 19, 2009
Editor's Note: This article is the second of a two-part interview with Linda Sherry, the Director of National Priorities at Consumer Action.
Mike: It has been suggested that those with good credit scores will find good credit card deals and those with poor scores will not find cards available at all. Are you finding this true and if so what can folks do to improve their scores?
Linda: I think this is true. People with poor scores should avoid the products that target their demographic with high upfront fees and tiny lines of credit. Instead, look for a good secured card.
The best advice I can give people about improving their scores is pay your bills on time (or even early!), do not use over 40% of your lines of credit (the lower utilization the better), and check your credit report for errors or possible identity theft on a regular basis. Each year, always get free copies of your credit reports (from the 3 major credit bureaus) from AnnualCreditReport.com.
If you are already in default or charged off status on credit accounts, it is going to take super-human efforts and many years to improve your score. Don't go there in the first place.
Mike: What will happen with credit card fees and penalties in this credit crunch?
Linda: We are already seeing increases in rates and new monthly fees for card customers. Until the new Fed rules take effect in July 2010, I think we will continue to see blanket re-pricing for "economic conditions" as well as risk-based repricing on individual accounts.
Mike: Do higher interest, decreased rewards, and fewer offerings seem to be the trends? Do you see other trends?
Linda: One thing we are seeing is a new and "creative" fee such as the Chase monthly fee for people with low promotional rates.
Mike: Are there cards consumers should be looking to?
Linda: Dare I say that any card from the top six banks is pretty much the same as any other? Just make sure that the reason you pick a card has nothing to do with pretty pictures on the front and everything to do with what is in the fine print.
Getting a reward, such as a cash rebate, is useful, especially if paid in full every month. Let's just keep our fingers crossed that the companies don't take back the most robust rewards.
Mike: Do you have any other comments you'd like to make?
Linda: I'd like to see people help us in our efforts to get new laws passed in Congress to protect credit card users. Check out our Take Action Center. Not only do we have specific alerts you can write to your lawmakers about, but also we allow anyone to write anything they want to their lawmakers, local and state officials, and news outlets. All free, but of course, we accept donations if the spirit moves you! You can also sign up for email alerts.
Mike Killian is founder of Learning Credit and Debt Management. Mike has been writing about credit and debt management issues that are of importance to consumers for over 8 years. His articles have been referenced by various members of the media, including MSNBC and The Motley Fool. Mike has also offered debt elimination seminars to businesses and community colleges for many years.
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