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Personal Debt Issues

Credit Card Conflict: The New Reality of Banks vs. Consumers

A record number of delinquencies have been reported in three key segments of consumer lending: 1) home-equity loans 2) equity lines of credit and 3) credit cards. Record high levels of payment defaults are being driven by the dual forces of falling real estate prices and rising unemployment. Approximately 20% of all credit card customers polled in a recent J.D. Power Survey indicated they had received a credit card rate increase, up significantly from last year. Not surprisingly, customer satisfaction with their credit card service ranks the lowest of all financial categories. Exercising all their revenue generating options, the banks have implemented across the board increases by jacking up interest rates, annual fees, monthly minimums and slashing customer's maximum card limits. Many of these changes have been sparked by the banking industry's own lack of financial health as well as pending credit-card reforms on tap to go into effect in February of 2010.

Bankers had forewarned Washington that any credit card legislation would likely result in a less consumer friendly credit climate as well as producing higher borrowing costs. Many banks have increased most consumer service fees and have made it more difficult for even credit-worthy consumers to obtain credit as consumers report difficulty applying for credit across a broad spectrum of categories. Though it's important to note the majority of consumers report paying virtually nothing for a checking account, use of their bank's own ATM along with some other basic account services. However, the consumer's hostile attitude towards banks grows as resentment about the number of taxpayer funded bailouts reaches the breaking point. The best way consumers can defend themselves against a lender's attempts to extract fees and rate increases is to remain alert in reviewing all statements and disclosures they receive in the mail. Consumers must make an effort to monitor their accounts more closely and to avoid any triggering events which could result in the punitive assessment of fees and to shop around for a better deal whenever possible.

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Nancy Osborne, ERATE.com Nancy Osborne has had experience in the mortgage business for over 20 years and is a founder of both ERATE, where she is currently the COO and Progressive Capital Funding, where she served as President. She has held real estate licenses in several states and has received both the national Certified Mortgage Consultant and Certified Residential Mortgage Specialist designations. Ms. Osborne is also a primary contributing writer and content developer for ERATE.