Tuesday, January 19, 2010

Credit Card Changes in 2010 Part 2

I have been a member of my local credit union for over 10 years. I have always paid my credit card bill on time or before the due date. I have often received automatic credit limit increases because I am a good customer. I took pride in knowing that I was a good customer and that my credit union appreciated my business.

This past weekend I received a letter from my credit union stating the my fixed credit card interest rate would now become variable effective March 1, 2010 and if I did not wish to have a variable interest rate account I could close my account. In addition, my credit union is converting all of their fixed accounts to variable accounts.

Read any notices you have recently received or will soon receive from your credit card company and make sure you understand the changes being made. If you are not sure call the company and ask them to explain in more detail. If you don't like the new terms you have the option to close your account, however, closing your account may impact your credit score.

If you have good credit your score may drop by a few points, however, if you have bad credit you could see your score drop by several points. Weigh your options if you find yourself in this situation. Here are some things to consider if you find out your fixed rate credit card is being converted to a variable rate credit card:

1. You interest rate will change as the market rate changes.

2. You will pay more in interest and finance charges.

3. If you are sending the minimum monthly payment you could go over your limit if your credit card is maxed out or near the limit.

4. You will have to pay more in fees such as: late fees, over-the-limit, cash advance, balance transfer, annual fees, etc.

5. A variable interest rate makes it difficult to include the credit card payment or an estimated payment amount in your monthly budget or spending plan because you will never know the minimum monthly payment until you receive the statement.

6. Your credit score may or may not be impacted depending on your credit rating (bad, good, average).

7. Shop around at sites like creditcards.com, bankrate.com or cardrate.com to find a credit card that offers a fixed interest rate.

8. Consider using your debit card as a credit card to maintain credit history.

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