Credit Cards: Still Necessary Even as They Become Evil - For What It's Worth - Comcast.net Finance

There's no shortage of news surrounding the credit-card industry these days. Reports about new regulations, covert rate moves, bounty offers, and surreptitious account closures have become so routine that they barely register in the minds of overburdened American consumers.

But as I've said before... fall asleep at the credit-card wheel, and you run the risk of a nasty accident. With that in mind, here's a look at some of the newest obstacles littering the plastic landscape.

One Small Step Forward...

In what could prove to be a minor victory for consumers, Senator Sheldon Whitehouse introduced legislation this week to shield Americans in bankruptcy from claims by card lenders if the rates they charge are deemed "excessive." The Rhode Island Democrat had previously introduced a bill seeking to give consumers looking for bankruptcy protection the right to negotiate with credit-card lenders.

What will this one-two punch mean for you -- if the legislation survives in Congress? A little less pain if you happen to find yourself staring down bankruptcy. That may sound like too little, too late… but hey, it's better than nothing.

...After Two Steps Back

Late last year, Ellen Cannon at Bankrate.com, Chris Walters at The Consumerist and others first brought attention to some interesting new practices put into effect by Chase.

For starters, the lender instituted a new $10 monthly fee for cardholders taking advantage of its balance-transfer offers. On top of that, Chase decided to raise the minimum monthly payment on such accounts to 5% of the outstanding balance from the industry norm of 2%.

As Walters states, paying 5% each month instead of 2% is a sound financial practice, and ultimately will lead to having your balance paid in full much quicker. But shouldn't that decision be left up to the cardholder?

The balance-transfer offers that litter my mailbox are full of conditions and laden with fine print. But the thought of agreeing to all of those terms in the first place… only to have an additional layer of fees and requirements layered on top after the fact smells funny. Shame on you, Chase.

A New Spin on 'Cold' Calling

Earlier this month, the New York Times published an intriguing profile of DCM Services, a collection agency that specializes in the growing business of reclaiming debts from the deceased. That's right... DCM sees the death of the indebted as a mere speed bump on the road to its financial success.

Reporter David Streitfeld details the special training DCM's employees receive in tactics such as "empathic active listening," designed to make one's next of kin more likely to cough up the few hundred dollars owed on a loved one's credit-card account.

It's easy to beat up on DCM. But in keeping with the theme, it's not the real villain here. If DCM didn't take the assignments to track down these debts, some other collection agency would.

So who are the big credit-card, auto-loan, and health-care companies behind this special variety of "cold" calls? We'll never know. DCM's contracts with its clients preclude it from disclosing that information. Apparently, it's not good brand-building to hound grieving family members in search of whatever cash they can scrounge together.

Word on the Streets

But despite the recent spate of negative press directed at the credit-card industry, plastic remains a permanent personal-finance fixture. And that's not such a bad thing.

Used wisely, credit cards are a great money-management tool. They offer day-to-day convenience and protection (one card is far easier and safer to carry than a wad of bills for a number of reasons) and by their very nature allow you to float yourself a short-term loan from the bank free of charge. That's hard to beat.

You can even come out ahead on the deal if you are disciplined enough to pay your balance in full and reap frequent-flier miles, cash back or other rewards (CardHub.com and Bankrate.com are two of many sites that can pair you up with the best card for your needs).

Yes, credit cards are here to stay. Perhaps no better indication of that can be found than the increasing migration toward plastic of businesses that once were all-cash. For example, New York's Taxi and Limousine Commission says credit-card transactions now account for 20% of its fares -- up from a mere 6% a year ago -- as yellow cabs steal market share from more-upscale competition.

So credit cards are helping keep the Big Apple's hard-working cabbies on course in these tough economic times. They can do the same for you -- as long as you keep your eyes on the road.

Are you turning to plastic more often than ever? Are you able to pay your balance in full each month? Share your top tips and biggest pet peeves for credit cards.

Message Edited by Anthony_Catalano on 03-26-2009 04:14 PM