The degree to which credit card companies pursue annual fees will depend on a number of factors.  If Bank of America’s annual fees cause an uproar from credit card customers, some companies may hold off on passing annual fees.  However, consumers have been in an uproar over increased interest rates all year long, and that didn’t stop Citibank from raising interest rates to 29.99% on many customers a mere three weeks ago.

Rewards credit cards that do not carry annual fees will likely be the first type of credit cards to see fees added.  Many consumers will be willing to pay these fees in exchange for cashback, airline miles, or points that can be redeemed for various merchandise, as rewards programs are quite popular among savvy credit card users.  Already, most airline specific credit cards carry annual fees of $50 or more, and many American Express cards carry annual fees that can be as high as $400.  However, the majority of credit card users gain little from rewards programs and would likely opt out of any annual fee if given the choice. 

Unfortunately, the new credit card laws do not address annual fees, and consumers will not have the option to opt out of annual fees without closing their accounts.  This, in turn, can hurt credit scores which, to make matters worse, can make it more difficult to obtain a new credit card.

No annual fee credit cards will likely remain available to consumers who use bare-bones, no frills credit cards that do not carry rewards programs.  However, consumers who don’t have the best credit may be charged annual fees to use those cards as well.  The final implementation of new credit card laws, as well as the condition of the economy, will play huge roles in the future of annual fees.  But based on the actions of credit card companies this year, it is likely that no annual fee credit cards will become the exception, rather than the rule.

In the past few weeks, however, more and more credit card companies have upped the ante by returning to 0% for 1 year offers.  This is particularly helpful for consumers looking to take advantage of balance transfer deals that had previously been reduced to an average of six months.

Unfortunately, it is unclear how long these credit card offers will remain available.  Credit card companies often conduct market tests-in which we are the subjects-to determine the least costly ways to reign in new customers.  During the heart of the credit card crisis-from January of 2009 until August-credit card companies engaged in activities that served to chase customers away.  This, as you may know, included interest rate increases, minimum payment increases, and the changing of fixed for life APRs into variable rates.

With the exception of Citibank and Wells Fargo, most major credit card issuers have stopped raising interest rates as the new credit card laws are set to take effect.  However, Citibank raised interest rates substantially on many customers this weekend, signaling that all is not entirely well at one of the nation’s largest credit card issuers (and bailout recipient).

Fortunately, customers who are suffering under the weight of high interest rates do have more 0% credit card offers to choose from today.  Hopefully this trend will continue.

For more information on current credit card applications and to apply online, please use the links to your left to peruse offers at Smart Credit Choices.

Citi’s decision to raise interest rates to an astounding 29.99% represents perhaps the most dramatic and unjustifiable rate increases to date.  Generally, 29.99% interest rates are reserved for customers who have defaulted on their accounts and is generally the highest rate charged by any prime lender.  Even cash advances, which carry absurd interest rates, are usually only charged APRs of around 22%.

Consumers who have been notified of a rate increase have little choice but to choose to opt out or close their accounts in order to preserve their current interest rate.  However, opting out can lead to a number of problems.  First, opting out can cause significant credit score decreases, as closing an account increases a person’s credit utilization ratio, which is the amount of credit card debt used versus what is available.  Credit utilization ratio’s account for 30% of a person’s credit score, and people with high ratio’s appear maxed out to creditors.

Appearing maxed out can make it much more difficult to get approved for a new credit card, not to mention higher mortgage and other loan rates.

To mitigate the effects opting out can have on your credit score, strongly consider applying for and opening a new credit card account immediately.  This will not only help decrease your credit utilization ratio, but provide you with lower cost credit you may not be able to get if your credit score is damaged by an account closure.

If you received a rate increase notice but do not carry a balance on your credit card or can pay it off, it may be worthwhile to keep the account open to prevent damage to your credit score.  However, anyone who will need time to pay off their accounts should elect to opt out immediately.

Should you choose to open a new credit card account, you can review credit card applications on our website by selecting a category from the left.  Many banks are still offering 0% rates that last up to 1 year and you may be able to turn this horrendous situation into a positive by utilizing a 0% balance transfer credit card to reduce interest expenses.

For more information on 0% credit card offers, please visit the comparison section of this website where you can compare offers and apply online.

Most of the consumers who have left comments on the matter have had no luck dealing with customer service.  However, the post below is from a visitor who was able to negotiate a lower monthly payment, although he was forced to accept a substantial interest rate increase.  Here is his story:

“Like many others, a week ago I got the rude surprise that Chase was raising the payment on my two cards from 2% to 5% of the balance. I had earlier transferred high interest cards to these life-of-the-loan 4.99% offers. I always paid on time–in fact, electronically a week prior to the due date to be sure I retained the excellent rate. I also paid above the minimums. With the new requirements, however, my total payments would now go from roughly $500 per month to $1250! An arbitrary increase of $750 per month was simply not an option for me.

I called and requested to opt out, close the cards, and keep the existing terms. I was told this was not possible but that I was welcome to pay off the cards in full or accept the new payment terms. Since I pointed out I didn’t have the nearly $25,000 required to do so and would have to fall into default on the cards if the new monthly terms took effect, I got transferred to another person.

This second customer service rep suggested I transfer the balances to a low interest card with another bank. I informed her that this was simply not an option for me, as I didn’t have the credit available. When I once again mentioned the inevitability of defaulting if the new payment terms took effect, she transferred me to yet another person, who took down details of my monthly income and expenses.

I was then offered to have the accounts closed and have a 5-year payout on the balance at 15.99% interest–more than triple the current rate. I was so shell-shocked that I met this with stunned silence, after which she offered me a 5-year 12% deal. Supposedly it’s fixed and can never change. Then again, it seems I’ve heard that before. But I wound up taking them up on this rate the next day, though I was required to make an immediate payment on each card to initiate the new payment schedule, despite the fact that I’d just had my normal payments on both cards credited to my accounts two days earlier.

Needless to say, I will never, ever do business with Chase again. I intend to pay off both cards in under 4 years–sooner if possible, as I will pay above the monthly required payments like I usually do. But once that happens, I will never give them another penny. I love the fact that they say people like me are not paying down quick enough, but they are more than happy to raise the rate and thereby prolong the debt payoff. Chase’s actions–especially after receiving the bailout money–are simply deplorable.”

Unfortunately, this is the first news of someone getting a deal that’s been posted on Smart Credit Choices.  Hopefully, others will have better luck.

A recent article on CNBC.com (http://www.cnbc.com//id/29637583) discusses some superficial trends in the credit card rewards landscape.  However, the article misses the big picture, which is best understood in the context of the past three years. 

A great place to start is cashback credit cards.  In 2006, Citi offered a card which provided a full, unconditional 5% cashback on all gas, grocery, and drugstore purchases.  This offer was quickly discovered by saavy consumers who not only just used their cards where they could get 5% cashback, but also paid their bills in full every month.  These consumers made handsome profits by simply using their credit card in place of cash.

It didn’t take the banks very long to isolate money losing rewards programs.  Consequently, full 5% cash back offers were quickly replaced with 3%, 2%, and ultimately, the 1% cash back rewards card.  Today, earning 1% cashback is about as good as it gets, although a few cards still offer double rewards.

Blue Cash from American Express, for example, still offers a full 5% cashback on gas and grocery store purchases.  However, there is a rather large caveat:  you must spend $8,500 in order to earn 5% cashback.  Until you hit that threshold, gas and groceries earn 1.5% and all other purchases earn 0.5%.  Despite this spending threshold, consumers who do all of their spending with this card and pay their bills in full can still make out pretty well with this deal.  However, I wouldn’t be surprised if American Express pulled this deal from the market tomorrow, as credit card companies are about as predictable as the weather these days.  (You can learn more about cash back offers in the cash back credit card section of Smart Credit Choices.)

While cash back credit cards have seen the most dramatic cuts over the past few years, airline rewards cards have remained relatively stable.  One reason for this lay in the fact that most airline credit cards associated with a single airline charge hefty annual fees of $75 or more.  Another reason these cards haven’t cut promotions as much lay in the fact that it takes quite a bit of time to earn enough miles to get a flight.  With most cards, you’ll have to spend $50,000 to earn enough points for a single flight. 

Consumers who want to earn airline miles without paying an annual fee still have options.  More than a few credit cards offer no fee airline rewards.  For additional information, see the airline credit card section of Smart Credit Choices.

Overall, it is quite true that credit card rewards programs are on the decline.  However, this is not a new phenomenon.  It has been going on for a few years.  What is alarming is the recent rate of change, which indicates that credit card rewards programs will get stingier before things improve.

TALF, the Term Asset-Backed Securities Loan Facility, was supposed to begin in early February and facilitate the packaging of credit card loans into securities.  This would, in theory, free up capital for credit card companies to issue new credit card loans.  Unfortunately, the TALF has yet to begin operations, and consumers are still facing difficulties obtaining credit card, car, and student loans.

Tomorrow should bring news about the TALF program, and hopefully the news is good.  Otherwise, consumers will face even more obstacles in the quest to obtain credit.

Sources:  http://www.reuters.com/article/bondsNews/idUSN0927208920090209

Its almost absurd to imagine that the same company that flooded mailboxes with credit card advertisements for the past decade is now turning people away at the door, but this appears to be the situation.  Of course, they are still raking in the dough on all the people they’re charging 27.99% interest rates.  However, the fact that they are making it difficult for people to get credit cards is not a great sign for the economy. 

Fortunately, having a Chase credit card is not all that its cut out to be.  A recent post on Chase credit card practices drew more than a few negative comments.  Perhaps its best to not have something Chase in your wallet?

Source:  http://online.wsj.com/article/SB123180989113175857.html?mod=googlenews_wsj

The main victims of the credit card rewards crunch is the cash back credit card.  Two years ago, a number of credit cards offered a full 5% cash back on all gas, grocery, and drug store purchases.  Today, the only credit card to offer that level of cash back is Blue Cash from American Express.  However, a person must spend $8500 a year to reach 5% cash back.  Before that, the cash back level is 0.5% to 1.5%.

Airline miles rewards have also seen a pullback, but these changes have as much to do with the airlines as the credit card companies.  For the most part, consumers still earn the same amount of miles.  In some cases, such as with the you can earn more.  Unfortunately, the airlines are requiring more miles to get seats, so the value of the miles you earn is diminished.

Inspired by the Journal article, I put together a list of the best credit card rewards programs in the main section of Smart Credit Choices which is accompanied by my editorial opinion.  Ultimately, and specifically for smart, rewards junkies, the best way to earn rewards is to employ a multi-card strategy.  By using a different card to get the best rewards, you can essentially build the best rewards credit card yourself.

For more information, you can read more about the best credit card rewards programs or compare all rewards credit cards in the main section of this website.

Sources:  http://online.wsj.com/article/SB123180989113175857.html?mod=googlenews_wsj

Recently, however, credit card complaints are coming from people who are paying on time.  A common issue is the raising of interest rates.  This has been going on since the summer and credit card companies continue to raise interest rates on customers, even as the Prime rate had dropped by nearly 5 full points.  During the last year, credit card interest rates should have gone down by 10-20%, if not more.  Yet more and more people are getting their interest rates raised.  Of course, the credit card companies do provide warning.  However, in typical credit card company fashion, they are doing so with junk mail letters many people are tossing in the garbage.

The other issue which continues to occur is the lowering of credit limits.  While I understand and agree with the logic behind many of these decisions, I am still outraged at the consequences this can have on people’s credit scores.  Many people who were using 30% of their credit limits before a limit decrease end up using 90% after the decrease.  This can lead to credit scores being reduced significantly and the cost of borrowing (from the same banks) more expensive.

The final issue that has recently come to my attention is the raising of minimum payments.  A visitor to this blog posted about a disgusting credit card practice being used by Chase.  Essentially, they gave her two options:  pay twice as much every month or we’ll double your interest rate.  This is truly shameful and I hope this is not occurring frequently.

2008 was a tough year for people and credit card companies.  However, when Christmastime arrived, the banks were still eager to put coal in our stockings.  Hopefully, we’ll see some positive changes in 2009.  If not, we should all start stocking up on coal to send to our credit card companies.