With the economy in a holding pattern and the holidays just around the corner, many New Jersey consumers feel forced to rely on credit cards for their shopping needs, but dread doing so. Why? Chances are they’ll have more trouble paying them off than ever before.
In fact, recent reports show that many consumers have seen their rates double, from 14% to a whopping 28%, in just the past few weeks. Is this illegal? No, but according to consumer advocates it is a desperate effort by banks to squeeze as much money out of consumers before February 22, 2010, when the new Credit Card Act goes into effect. In the meantime, banks are using every means at their disposal to seek loopholes and raise money from credit cards by adding new fees, hiking interest rates and altering account terms.
While Congress looks to enact a more immediate fix, savvy consumers have educated themselves and are turning to credit unions to source lower-rate credit cards. A recent report by the Pew Charitable Trust, issued by the Pew Health Group’s Safe Credit Card Project, showed that credit unions offer interest rates that are up to 20% lower than those of bank-issued cards.
Credit unions also typically include free customer guidance on managing debt and do not require annual or late payment fees. Moreover, they continue to offer generous rewards programs and low APRs.
For example, in addition to low-rate credit cards, New Jersey’s largest credit union, Affinity Federal Credit Union, offers its members a free, one-on-one unlimited counseling program called BASES (Budget and Score Enhancement Service) that helps them determine how to best use their available credit and raise their credit score.
“The holiday season is a crucial time to monitor credit card spending. With spiking interest rates, keeping a close eye on your spending becomes increasingly important,” said Donna LoStocco, VP, member experience at Affinity.
For consumers who are concerned about recent rate hikes, LoStocco advises the following:
* Educate yourself on the rates and fees of your current credit cards;
* Call your credit card providers if you’ve experienced a rate increase and ask why they’ve increased your rate;
* Understand what your options are in terms of getting your rate lowered;
* Evaluate the card as it relates to your overall credit landscape (for example, if a card does not have a long history in relation to your other cards, cancelling it may not affect your credit score);
* Remember that older credit lines have a greater impact on your score;
* Seek financial advice from a qualified professional, and
* Consider the benefits of opening a credit union credit card account (including Affinity’s own).
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