credit cards

Credit card damage control

These days, you can still call, but know that the conversation could have consequences. Your request constitutes an application for credit, and the issuer can pull your credit report and score and ask for supplementary data, such as your job position and salary. "They may make an adverse change to your account because of what they see on your credit report or something that you've told them," says John Ulzheimer, president of consumer education at Credit.com and a CNBC contributor.

Requesting a lower rate because you can barely meet the minimum is a different story.

"If you can continue to make your payments comfortably and you just want a lower rate because you feel like you deserve a lower rate, I'd keep that phone call on the back burner for right now," he says.

4. Card issuers may punish for minimal card usage

In this environment, both over and underutilizing your card can result in some type of adverse action taken against your account. These days there are no guarantees for protecting your account terms, only best practices.

"You used to be able to tell people, 'Pay your bills on time, don't use your credit cards too much and don't apply for credit excessively and you'll be fine,'" says Ulzheimer. These days some issuers may require a certain level of usage and revenue to justify leaving an account open and at the same limit, he says.

Large lines on which only small charges are made may get reduced to reflect the cardholder's actual spending habits. Banks may do this to minimize their loss in case you max out the card.

It still makes sense to keep balances small and pay them off right away. The limit may get lowered but the score damage will be less than if you had piled on a heap of charges.

Ulzheimer advises charging on a card at least once a quarter to show usage. Pay off the balance each time.

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5. Banks want to help struggling cardholders

Cardholders having difficulty making the minimum payment because of financial hardship may be in luck. Most major card issuers have hardship programs to help borrowers in dire straits. According to The Nilson Report, a payments industry newsletter, some 2.7 million credit cardholders received some sort of debt relief in 2008, through settlement, temporary forbearance, interest rate reduction, debt consolidation, payment plan or other deals.

Of course, an adverse action by itself can squeeze cardholders already stretched thin. The same Synergistics study on the credit crisis found that about two-thirds of the respondents who received a change in terms had difficulty making payments as a result, but only a third of this group actually called the lender about the problem.

Silence proves bad for both issuer and cardholder as the latter starts to miss payments. The customer doesn't catch a break and the issuer faces another defaulted account. Banks welcome the communication. "Issuers would love to be able to interact with the credit cardholder earlier on in the process so they could try to take some steps to make this debt keep paying," says William McCracken, CEO of Synergistics Research Corp.

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