Credit card companies seeking to lower their risk have several ways to go about it, and they’ll be using every one of them between now and February 20, when the new laws go into effect.
Some consumers are being hit with lowered credit lines – sometimes lower than their outstanding balances. This triggers over-limit fees and causes panic in those consumers who are unable to pay the balance down below the new credit limit.

Others are seeing arbitrary interest rate hikes – which not only makes it much more difficult to pay down a balance, but causes their minimum payment to increase. This one can trigger panic again, because many consumers have been barely able to make the current minimum.

A third set of consumers, those who have contracts with credit card companies that lock in a rate until the balance is paid, are seeing their minimum payments rise. Again – panic. One gentleman who wrote to bankrate.com said that his minimum had been 2% and he’d been feeling proud of himself for paying more each month – $600. Now his new minimum is 5%, which is $1,200. He can’t handle an extra $600 per month.

Some credit advisors are saying that consumers should call their credit card issuers and try to negotiate. Apparently some have been successful with this and others have not. Does it depend upon your attitude when you call, the person who answers the phone, or your past payment history?

We don’t know, but it’s worth a try.

Most credit card issuers will allow consumers to opt-out of an interest rate increase by closing the account and continuing to pay at their old rate. This will, of course, eventually result in damage to the consumer’s credit score. It could result in immediate damage if the card issuer reports the available credit as the amount due. If they continue to report the original credit line and the current amount due, the credit score hit won’t come until the last payment is made and the account is closed.

But what can you do if your minimum is suddenly 2 ½ times what you’d been paying, and you don’t have the extra funds? If talking won’t help, the only alternative is to seek funding elsewhere and pay off the account.

In today’s economy, the best course of action is to pay down debt as quickly as possible, then re-work your budget so no more short-term credit is needed.

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Vacationers worried about carrying too much cash often take along a debit card, so they can access cash from their checking accounts as they need it. This can be a good move, or a poor one should the card be lost or stolen.
In order to fall under the $50 maximum liability clause in your debit card agreement, bogus charges must be reported within two business days, so it’s vital to your financial well-being to keep a close eye on that card and report its loss immediately. Your liability is limited to $500 if you notify the bank within 60 days of a bank statement showing bogus charges, but that won’t help you much if you’re in a foreign country and suddenly have a bank account with a zero balance. An active thief could clean you out within hours!

Be sure you carry the necessary information for notifying your bank immediately of any loss. Keep the information in your hotel safe, and also leave a copy with someone at home that you can reach in a hurry. This is one time when “overkill” could be beneficial.

Be careful with your debit card before you leave home, as well. Unless your bank balance is very large, don’t use the debit card to reserve a hotel room or a car rental that you intend to pay for later with a credit card. Funds for these charges will be immediately “frozen,” which could leave you with no money to pay the house payment before you leave home.

When planning your trip, check your card issuer’s web sites to locate ATM’s in the city or cities you’ll be visiting. Unfortunately, some ATM machines in high-traffic tourist locations are bogus. So before you insert your card, be sure that the machine you’re using is legitimate. Generally, ATM’ in airports or hotels are “for real.”

Before you leave, call your bank and let them know that you’ll be on vacation. Tell them where you’re going and how long you’ll be gone. Otherwise, they could see unusual charges and assume that your card has been stolen. If that happens, they’ll freeze the account until they can contact you.

Once at your destination, use your in-room safe or the hotel safe to keep your extra cash, your travelers’ checks, your debit cards, and your credit cards safe. While you’re at it, place your passport, travel tickets, and your itinerary in the safe too.

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How often do you check your credit report? For far too many consumers the answer will be “Only when I want a loan.” That means that identity thieves can use your credit and your good reputation for months or even years before you discover their activities.

You might not notice at all until you find your bank account empty. Or, you may receive a notice from the IRS denying your tax refund because it has already been paid – or worse, asking why you didn’t report ALL of your income for the year.

The fact is, over ten million consumers were victimized by identity theft in 2008, and experts predict that the number will be greater for 2009. Not only are the thieves draining bank accounts and running up huge balances on credit cards, they’re using other people’s identities to rent homes, gain employment, and access health insurance.

You can’t insulate yourself from it, but you can nip it in the bud and prevent the thief from continuing to use your identity month after month.

I just read about a typical case when a woman wrote an on-line forum to share her distress. She asked if anyone else had been victimized as she had. I wrote back and said “Yes, about ten million per year.”

She had gone on line to check her bank balance and found that while her house payment and her insurance payment were set to come out automatically, there was no money there to cover them. She was frantic, because she had no “extra” money to put into the account to cover those expenses.

It turned out that when she went back through the transactions, she found that the theft had begun several months ago, and was ongoing.

Why had she not looked at her bank account for several months? Had she balanced her statement when it arrived, she’d have seen transactions that were not hers and stopped the theft in its tracks. Every consumer should check every bank statement and credit card statement as soon as it arrives.

In addition, everyone should keep a careful eye on his or her credit report. Activity such as a new account, a jump in the balance of an old account, a balance on an account you believe is inactive, a new job, or a change of address will alert you to a theft before it gets completely out of hand.

Check your credit report today – and check all the statements from your banks and credit cards every time they arrive.

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