Advice for Credit-Card Users: Brace Yourself - For What It's Worth - Comcast.net Finance

Back in December, to great fanfare, regulators approved a set of new regulations for the credit-card industry. Key provisions intended to offer American consumers much-needed relief include mandates for truly fixed interest rates, rational allocation of payments and better subprime card terms.

But buried beneath the optimism with which the rules were greeted lay an inconvenient truth: The new rules will not take effect until 2010.

Over the past two months, evidence is mounting both anecdotally and via media reports that nearly all of the major card issuers are ramping up efforts to squeeze more money out of us while they still can. Here's a quick look at what has been going on in the credit-card industry—and some steps you can take to guard against taking a hit.

Attacking from Every Angle
As Ron Lieber's appropriately titled article in the New York Times suggests, credit-card companies are in fact going to war against losses. And as the saying goes, "all is fair in love and war." Among the strategies card issuers are using are these tactics you certainly will not love: raising rates, lowering credit limits, imposing new fees… and for good measure, closing accounts altogether.

If you hold several card accounts, chances are that you'll be hit by at least one of these changes in the coming months (if you haven't been already). Trust me on this one, as someone who recently received a letter informing me that one card account I haven't used in years would be closed unless I started using it—and soon.

Membership Has No Privileges
Although threatening account closure simply because a card hasn't been used in a while might seem rather capricious, at least it's understandable. But what American Express reportedly has been doing— closing users' accounts simply because they shop at certain stores or work in industries that might soon face economic pressure… now that feels downright creepy.

The company claims it didn't actually use these criteria in assessing accounts (its letters to affected cardholders clearly stated otherwise) and that it doesn't plan to judge your creditworthiness this way going forward either. But you still might want to check out this New York Times piece before using your card to pay for marriage-counseling sessions or a night out at the local pool hall… if your platinum AmEx is that important to you.

A Swift Kick to the...
Subprime cards typically are seen as the red-headed stepchild of the credit-card industry. Similar accounts in the mortgage industry are seen as the catalyst for the housing-market crash and subsequent domino effect being felt today throughout the economy.

But so-called private-label cards, which occupy the middle rung on the credit-card ladder between subprime accounts and accounts serviced by industry giants like Visa and MasterCard, are the ones hurting most right now.

What does this mean for you? It could be much more difficult than it has been in the past to get approved for in-house financing on big-ticket purchases like a TV at Best Buy or appliances at Sears.

Your Only True Recourse
The other inconvenient truth surrounding all of this news out of the credit-card industry is that there isn't much you can do to stay ahead of the curve. Resources like CardHub.com can help you compare credit-card offers and find the card that best suits your needs. And The Wall Street Journal partners with FiLife.com on a nice little How-To Guide.

But the only way to avoid these concerns completely is to live within your means and stay out of debt in the first place. That obviously is far easier said than done. But M.P. Dunleavy of the New York Times offers a little inspiration with a look at how she and her husband changed their spendthrift ways.

Whether your future holds an existence as a new, debt-free you… or continued struggles to stay abreast of the latest credit-card pitfalls, Dunleavy's simple advice hits the mark. And I can't say it any better than she does: Brace yourself.

Has a credit-card issuer raised your interest rate or closed a dormant account recently? What are you doing to combat debt in these tough economic times? Sound off here.

Message Edited by Anthony_Catalano on 02-12-2009 02:47 PM