How?  For starters, the 0% introductory rates on purchases and especially balance transfers have helped keep a lot of money in savvy consumers pockets.  And for those who pay their credit cards in full every month, cashback and other rewards credit cards actually earn consumers money. 

However, it is easy to be unsympathetic to credit card companies, if not downright pleased to read about their troubles.  Unfortunately, what we all dislike about credit card companies will ultimately hurt everyone with plastic in their wallet.

Yesterday, Fitch Ratings predicted credit card losses could hit new highs in 2009 (see http://www.reuters.com/article/companyNews/idUKTRE4AB0DG20081112?symbol=DFS.N).  If, and to what extent, these losses occur will have a tremendous impact on the wallets of all credit card users.  Here are just a few examples of how losses at credit card companies can impact your life:

1.)  The End of the 0% Era:  Over the past five years, getting a 0% APR credit card has not been a difficult task.  However, these days of “free money” may disappear faster than Lehman Brothers.  In particular, the 0% balance transfer has helped countless consumers save hundreds, if not thousands of dollars a year on interest.  Without this refinancing safety net, many consumers will find it harder to get out of debt.

2.)  The Return of the Annual Fee:  Presently, the majority of credit cards charge no annual fees.  Those that do are generally tied to rewards programs that offer benefits such as frequent flyer rewards.  However, consumers who pay these fees do so out of choice, not necessity.  Soon, choosing to have an annual fee may not be an option.

3.)  Higher Fees & Interest Rates:  You think late and over the limit fees are high now?  In a year, we may be fondly remembering the days of the $29 late fee.  And interest rates?  How does 22% sound?  Many consumers with above average credit may find themselves unable to get better rates.

Of course, the scenarios above are all hypothetical.  The recession could be less severe than expected.  Banks may satisfy their hunger for money with our taxpayer funds.  Or, in what I consider a best case scenario, money will start growing on trees.

Unfortunately, there is little evidence to support any of these options, although I did receive an email about a money growing tree in Nigeria.  All I had to do was wire $10,000 to a numbered bank account to get the map.  I’ll let you all know how my money tree search goes, but in the meantime, the best we can do is hunker down, take advantage of 0% interest rates while they exist, and a shed a collective tear for credit card companies, before they make us cry with higher fees, absurd interest rates, and credit limits that won’t cover dinner for four at the Olive Garden.

Many had been hoping the “bailout plan” would help ease the credit crunch and encourage banks to lend to consumers.  Unfortunately, however, that seems like a fantasy.  Early this week, a J.P. Morgan Chase official was quoted as saying, “loan volume will keep going down as we continue to tighten credit.”  This is not good news, as Chase is one of the nations largest credit card issuers.

As banks tighten the reigns on credit, consumers may ultimately find themselves in  what is known as a “negative feedback loop.”  In essence, this is a scenario in which, for example, having a lower credit limit negatively impacts your credit score, which in turn makes it more difficult to get new credit, which in turn leads to higher interest rates on everything from credit cards to mortgages. 

These types of scenarios could ultimately make this credit crunch a credit crisis for many consumers.  The banks, of course, will profit.  When a person whose credit score has been decreased because of a credit limit cut applies for a mortgage, the same bank that cut that person’s credit limit can charge them more for a mortgage.  After all, that person does have a lower credit score.

The losses incurred by banks because of their reckless lending are being paid for with American tax money.  That’s enough to irk those of use who have been responsible with our finances.  But now, it appears the banks are once again operating out of fear and greed, and responsible consumers will continue to foot the bill for the mistakes of the banks.

When it comes to credit cards, and in particular to credit limits, there are very few remedies consumers can take to prevent banks from assaulting their credit scores.  However, one thing worth considering is applying for a new credit card to increase your available credit limit or to transfer your high interest balance to a 0% credit card.  A move such as this might not only save you money on in the short term, but help keep your credit score high, and thus lower the cost of borrowing for other financial products.  For more information on 0% credit cards and balance transfer credit cards, please use the left navigation to review and apply for credit cards online.

That said, it is now possible to get a 0% APR for 15 months on balance transfers.  This is good news.  However, this sudden change of course may not benefit most people searching for a 0% APR balance transfer.  Why?  In all likelihood, Bank of America will only grant this 15 month 0% APR to individuals with the highest credit scores.  The majority of consumers, even those with good credit, may not benefit from this new offer at all.

And there’s also a potential rub.  In a recent SCC article, “Will You Pay for Credit Card Company Mistakes? Of Course!,” I discussed a number of ways that consumers will foot the bill for the mistakes of credit card companies.  One of the issues discussed was how reducing credit limits hurts credit scores.  Another way credit scores can be adversely effected is by applying for credit cards.  For the most part, this is not a major factor.  However, if you apply to get a 0% APR for 15 months and are not approved and then apply for a different credit card, it may appear that you are desperate for credit.  This may, in turn, cause your other credit card companies to raise your interest rates or reduce your credit limits, thus sticking you in what’s known as a negative credit loop.

Until our site has collected enough data on the performance of these extended 0% APR offers, we advise consumers to proceed with caution.  However, if you have excellent credit, getting a 0% APR for 15 months is probably within your reach.

For more information on Bank of America credit cards and 0% balance transfers, please use the left navigation to review the appropriate sections in the credit card section of Smart Credit Choices.

In an extremely pessimistically titled BusinessWeek article, “The Next Meltdown: Credit Cards,” the author explores some of the factors that will contribute to future issues for consumers.  The most frightening of which is the percent of credit card users who fall into the sub-prime category:  30%, or nearly three times the percentage of sub-prime mortgage loans. 

Bailing out banks and subprime borrowers has cost taxpayers close to a TRILLION dollars, and subprime mortgages only make up 11% of the mortgage market.  However, the credit card market is significantly smaller than the mortgage market, so the banks can rely on their customers to help pay the bill for their reckless lending.

How will we pay for the reckless credit card lending of banks.  To begin, many consumers have seen their credit limits cut, a move the banks have taken to “reduce risk.”  While clearly a nuisance, this is more of a problem than many realize.  Credit scores take into effect the percentage of available debt you use.  Thus, if you had a $2,000 balance on a credit card with a $10,000 limit, your credit score would reflect this as a positive sign.  However, if your limit is then cut to $3,000, you will appear to be a riskier consumer, your credit score could decrease, and you could end up paying more for products offered by your bank, such as a mortgage or a car loan.

Additionally, if one credit card company drops your limit and you appear, on paper, to be maxing out your credit lines, the other credit card company may opt to “re-price” your account.  Re-pricing is a risk management tool that allows banks to make offers you should, but often are unable to refuse.  Essentially, when a credit card company decides to reprice your account, you will be notified by mail that you have two options:  close your account and repay it at the current interest rate or keep your account open, but pay a much higher interest rate.

Again, this leads to a vicious cycle.  Close your credit card and you have less access to credit.  Plus, you now have one less open credit card account on your credit report, which could in turn decrease your credit score.

Are you dizzy yet?  I sure am.  And the worst has yet to occur.  Soon, it may not be possible to get 0% APR credit cards to transfer those high interest balances too.  And, although we will all be paying through the nose, the credit card departments of the banks will continue to produce profits.  Of course, one could choose to be optimistic.  All you need to do is hope that everyone writing about the credit card industry is completely wrong!

At this time last year, throwing out those once annoying letters imploring us to save with a 0% APR on purchases and balance transfers for a year was a daily practice.  Sure, most of us ignored them.  However, they served as a reminder to many to think about the high interest rates they were paying on their credit cards.  For those who took advantage of the offers, a little piece of junk mail may have provided a few hundred or a few thousand dollars in interest savings.

As the credit crunch has worsened, credit card companies have severely cut back on the availability of easy, 0% financing.  However, it is still possible to find these deals online-for the time being.  For how long and to what extent major credit card companies will continue to offer 0% APR deals is a big unknown right now.  What is known, however, is that credit card companies aren’t going out of their way to get you to switch your debt to their credit cards.  And many want to lower your existing credit limits.

The best solution to the chaos in the credit and financial markets is to think like a Boy Scout, i.e. BE PREPARED.  If you are carrying a balance on a credit card with an interest rate in excess of 10%, do a 0% APR balance transfer.  If you plan on making new purchases you won’t be paying off immediately, apply for a 0% APR credit card.  And if you want to make sure you have credit available when you need it, apply for an extra credit card just in case.

The future of credit card lending is uncertain.  However, by acting now and getting the right credit card, you can prepare yourself for the days to come.

Over the past few months, the Wall Street Journal, as well as other major media outlets, have covered the cutting of credit limits.  Early speculation, which has been confirmed recently, points to specific targeting of certain consumers in geographic locations that have been hit hard by the housing crisis such as residents of Florida, California, and Nevada. 

The article in today’s Journal goes a bit further.  It suggests that American Express is using proprietary risk management tools to isolate consumers who share general similarities with consumers who have proven a default risk.  What are these similarities that could put you at risk?  One is having a mortgage loan from Countrywide Bank.  Another is shopping at Wal-Mart.  Yes, Wal-Mart.  Apparently, American Express views Wal-Mart shoppers as a risk. 

A spokesman for American Express confirms this shopper profiling to the Wall Street Journal, “If they’re spending in a way that looks like a pattern of other people who had credit trouble before them, it gets added into the mix.”

The Bell family, who are the credit crunch victims in the article, had their unlimited charge card credit limit cut to $1,100 were obviously upset.  The couple had done nothing to draw the attention of American Express; they had not been delinquent on their credit card or late on their mortgage.  They had simply fallen into a category of consumer that, according to computer models, made them a risk.

So what is one to do?  Avoid retailers like Wal-Mart that can provide a little extra savings during tough times?  Spend money on fees and refinance their mortgage, even though mortgage rates might be higher?  Neither option is ideal, let alone reasonable.  The best option for the Bell’s, and anyone faced with a lowered credit limit, is to fight back.  Cut up your old card and get a new 0% credit card.  There’s no reason to be loyal to a credit card company that clearly doesn’t trust you.  And there’s no reason to continue using a credit card that imposes unreasonably low limits on you just because you fit the wrong profile.

First, a little background on the Starwood hotel group.  They operate a wide range of hotel brands, ranging from the mid-range Sheraton to high end brands such as Westin, W Hotels, Le Meridien, and St. Regis.  So while you may have never heard of Starwood, chances are you’ve heard of their hotels.

Now, the credit card.  Currently, new cardholders can earn up to 25,000 Starpoints® for becoming a cardholder.  This is enough for up to 6 nights at lower range hotels, though only about one night if you’re looking to stay at a high end location, such as the St. Regis.

A real benefit comes in the form of upgrades.  Regular room upgrades start with 1,000 Starpoints at lower range hotels, but only increase to around 2,000 at the highest tier locations.  Similarly, suite upgrades are available starting at 3,000 points for lower tier locations.  At higher end hotels, the cost ranges up to 30,000 Starpoints.

Aside from using Starpoints® for free nights and upgrades at over 860 Starwood locations worldwide, you can also transfer them on a one to one basis for frequent flyer miles on over 30 airlines.

Lastly, new applications for the Starwood Preferred Guest card pay no annual fee the first year, a $45 savings. 

You can learn more and apply online for Starwood Preffered Guest Credit Card here.

The Starwood card is also available for businesses, although the terms vary slightly from the consumer credit card.  For more information on the business offer, you can view the application for the Starwood Preferred Guest® Business Credit Card from American Express.

1. American Express - 783
2. Discover - 751
3. Average Score for all Issuers in the Survey - 724
4. National City - 721
5. Chase - 719
6. U.S. Bank - 716
7. Washington Mutual (while it existed!) - 712
8. Wells Fargo - 709
9. Bank of America - 692
10. GE Money - 683
11. Target Visa - 682
12. Capital One - 678
13. HSBC - 667

As you can surmise from these scores, credit card companies aren’t exactly A students.  In fact, the bottom five, which includes Bank of American and Capital One, could all use tutors.  The overall scores, however, should be taken with a grain of salt.  Do you know anyone who loves credit cards?  Obviously, then, consumers won’t be handing out A’s to the the people who charge them interest every month.  Yet there are clear and substantial differences between the best and worst rated. 

While these differences are definitely worth considering, the most important factor to consider when applying for a credit card is the overall deal.  For example, Capital One may not have ranked well in the survey, but they offer great cashback and frequent flyer rewards.  Similarly, American Express led the pack, but many of their cards have hefty annual fees.  In the end, what others say about a credit card company should play a role in your decision making process, ultimately, the company that offers the best deal for your needs is the one you should do your business with.

You can review current credit card offers from the companies listed above by visiting their respective sections of Smart Credit Choices.  You can also compare offers categorized by features, such as interest rates and rewards to better target your search in the credit card application sections of Smart Credit Choices.

Source:  http://www.jdpower.com

Annual Fees:  Discover doesn’t charge them.  Many American Express cards do, with some consumer cards carrying fees in the low hundreds.  For the big spending Amex crowd, these fees may be worth the trade off to be a part of the much lauded American Express Membership Rewards programs.  However, many credit card users are better off keeping that money in their own banks.

Rewards:  While American Express offers a wide range of no fee rewards programs, most notably, the cashback program attached to Blue Cash® from American Express, Discover keeps its customers more than satisfied with its own Cashback Bonus® program, which includes popular cards such as the Discover® Open Road (SM) Card, which offers consumers 5% cashback on gas.

Customer Service:  Nobody likes credit card companies.  In fact, credit card issuers are the least liked players in the financial service industry.  However, according to J.D. Power’s executive director of financial service, Discover had about 50% less complaints than the average credit card company (source http://articles.moneycentral.msn.com/Banking/CreditCardSmarts/credit-cards-with-the-happiest-users.aspx?page=all)

Of all the credit cards included in the surver, only American Express and Discover received 4 or more stars in every category.  And, given the absence of fees, competitive cashback rewards program, and high customer satisfaction, a Discover card may be the card for you.

To compare and apply for a Discover Card, visit the Discover credit card section of this website.  You can also compare offers and apply online for American Express, Chase, Capital One, Bank of America, Citibank, and HSBC credit cards in their respective sections. 

Additionally, you can compare 0% APR offers, cashback rewards offers, travel rewards offers and more in their respective sections of www.smartcreditchoices.com.

While this position may seem alarmist, the history of the credit card contains many pages that do not contain the words, “0% Intro APR.”  In fact, many of those pages don’t even contain the words, “Intro APR.”  In January of 1999, a CNN Money article (see http://money.cnn.com/1999/01/27/banking/q_bankrate/) states that, “In the third quarter of 1998, only 36 percent of new card offers mailed to consumers included an introductory rate.”  And what were those rates.  In describing a “crackdown” on the percentage of credit cards that offered introductory rates, the writer states, “Because all those super-low teaser rate offers, often 5 percent or less, were wonderful for the consumer but lousy for the credit card companies.”  Its hard to think of a 5% APR as super-low, but its time to start contemplating the possibility of this becoming a reality.

Fast forward to 2001.  Same website, similar topic.  In this article (see http://money.cnn.com/2001/03/15/living/q_bankrate/), the topic is introductory rates for balance transfers.  And the idea of a 0% Intro APR doesn’t even get a sentence.  In fact, the leading deals offer introductory interest rates of either 1.9% or 2.9%, plus fees of up to 5% per transfer.  While this is not as high as the lofty 5% rates of the late 1990’s, it is still a good deal away from 0%.

While 0% introductory rates may not disappear altogether, the possibility should not be ignored.  Credit card companies have been tweaking their offers all year long.  Some companies, like Bank of America, have stopped offering 0% rates on purchases with many of the cards they offer online.  Other companies, such as American Express, have decreased the length of time 0% rates apply.  For example, Blue from American Express® has offered a 0% intro APR for up to 15 months since 2005.  Recently, the term was reduced to “up to 12 months.”

So should you panic?  Not yet.  However, if you are carrying a balance on a credit card with a 10% or higher interest rate, you may want to take advantage of a 0% APR balance transfer sooner rather than later.  The same holds true if you intend to make new purchases that you will not be repaying in full every month.  You can save hundreds on interest with a 0% intro APR now, but three months from now….

To learn more about current 0% APR credit cards, please visit the main section of SmartCreditChoices.com.  At our main website, you can compare close to 100 current offers and apply online for a money saving, 0% APR deal.