Credit Card Terms Still Changing

Nobody should expect credit card terms to settle down until the Credit Card Accountability, Responsibility and Disclosure Act (CARD) comes into force, probably in February 2010. Until credit card companies are forced to do so by the new legislation, they’ll continue to protect their profitability in every way they can.

Just this month, Bank of America wrote to some of its credit card customers who pay off their balances every month, warning that in future they’ll have to pay a new annual fee of anything between $29 and $99.

Meanwhile, in a similar move, Citigroup says that it plans to charge fees to those customers who fail to spend a minimum of $2,400 a year on their cards.

Credit Card Customers Outraged

People who pay their credit card bills in full each month are used to seeing themselves as the good guys. They’re responsible. They don’t incur late fees because they always settle their monthly bill on time. They don’t get charged for exceeding their credit limits because they never do so. They never pay any interest because they never have a balance beyond the end of the interest-free period.

In other words, they never pay anything for the convenience that carrying a card brings.

But, of course, administering their credit card usage, processing transactions, printing and mailing out bills, and all the other costs associated with running a credit card company have to be paid by someone.

While Others Struggle

Trouble is, the someone who pays is usually the person who can afford it least. And they’re not always the feckless, indolent caricature of popular myth.

Demos–which describes itself as “a non-partisan public policy research and advocacy organization”–has been studying credit card debt for some years. Earlier this summer, it published its latest report, which contains some uncomfortable reading.

Those Who Pay Already

Of course, some in low- and middle-income households have made bad decisions, and are living with the consequences. But many of those who lived responsible, exemplary lives were struggling before the credit crunch began to bite.

Between 2000 and 2006, the cost of living jumped 27 percent. But during the same period average household incomes were either stagnant or actually fell. No surprise then that so many people refinanced their homes, and ran up credit card debt to bridge the shortfall.

Last year, on average, low- and middle-income households owed $9,827 in credit card debt.

Old Enough to Know Better–But Little Choice

And, surprisingly, it’s seniors who are most quickly getting themselves into trouble. On average, people aged 65 years and over owed $8,138 to credit card companies in 2005. By 2008, that had jumped by 26 percent to $10,235, by far the biggest increase of any age group.

Less surprising is the reason for senior’s credit card spending. At $3,988 per household, they have more than twice as much medical-related debt on their credit cards than anyone else.

Take Some Credit for Compassion

Of course it’s irritating when a credit card issuer asks you to pay for the privilege of carrying a card. But remember that, if you don’t, someone’s grandmother may have to do without her prescription. Or somebody else’s grandfather may have to skip a vital visit to the dentist.

Published 10/21/09 (Modified 04/23/12)