Credit Card Companies Hike Rates and Cut Credit Lines
The New Yorker posted this article about the latest round of credit card misbehavior. As many AFFIL members have reported, rates are being increased and credit lines are being cut.
Consumers with some financial cushion can probably wiggle around these changes and come out unscathed. They can pay off the card in full; decline the new terms, stop making new charges, and pay off the existing balance at the old rate; or transfer the balance to a different card.
But there are plenty of consumers who are, in the New Yorker’s words, “captive customers.” They lack the savings to pay off credit card balances (which is why they have the balance in the first place) and need to use the card again for necessary expenses. Gone are the days when people could shuffle the balance off onto some other low-rate card, because new offers of cheap credit are no longer forthcoming. So if the car breaks down, there’s a new medical expense, or utility or grocery prices simply creep up, it’s the credit card which will have to make up the difference. Not to mention the role credit cards can play for laid-off workers trying to make ends meet.
This is the classic conundrum people face when their only financial security comes from the “plastic safety net.” At AFFIL we know plenty of people rely on this net (which is really a long term debt treadmill) because we’ve heard from real people in this situation. Please keep these and other stories coming by posting comments on this blog, or sharing your story here.
For an interesting discussion about this topic, see The Consumerist’s post on the New Yorker article and its accompanying comments.
(Photo: Wiki Commons)