Tuesday, Oct. 7
Posted 11 a.m.

Little-used cards canceled?

This week in Bankrate's daily e-newsletters, we're asking readers if they've seen their credit limits cut by credit card issuers. Many readers who've responded have told us that their limits have been cut on cards they don't use often -- or they've had their cards canceled altogether.

Credit cards are unsecured lines of credit to you, the cardholder. We know that all kinds of companies, especially banks, are trying to minimize their risk and keep as much cash on hand as possible. So trying to lower their risk, they're cutting cardholders loose or cutting their credit limits.

If you want to keep all of your credit cards in these tough times, you should use them at least once every six months -- and then pay off the balance in full! You'll be a cardholder in good standing and because you paid it off, you aren't going to be seen as a credit risk. The card issuer still may cancel the card or lower the credit limit, but this is one defense you can use to protect your cards.

To learn more ways to protect your credit cards from getting crunched, read my colleague Leslie McFadden's recent article on the subject.

Comments? Questions? E-mail plastic_rap@bankrate.com.

Friday, Oct. 3
Posted 4 p.m.

Wells Fargo announces Wachovia merger

Bankrate reporter Leslie McFadden contributed this entry.

Today, Wells Fargo made the surprise announcement that the company would acquire Wachovia for $15.1 billion in stock, with no financial help from the FDIC. Wachovia apparently killed its original deal to sell its banking operations to Citigroup for $2.16 billion.

In response to the agreement between Wells Fargo and Wachovia, Citigroup issued a statement charging that Wachovia had violated their exclusivity agreement. According to the press release, "The Exclusivity Agreement provides, among other things, that Wachovia will not enter into any transaction with any party other than Citi, and will not participate in any discussions or negotiations with any third party. The Exclusivity Agreement also provides that the parties would be irreparably harmed by any breach of the agreement and that the remedy of specific performance of the agreement is appropriate."

The statement further ordered Wachovia to cease the transaction with Wells Fargo.

Wells Fargo spokeswoman Lisa Westermann had no comment. Regardless of who scores Wachovia, the advice for cardholders remains the same -- keep using your cards, pay your bills on time to the usual address until otherwise notified. Watch your mailbox for important correspondence from your new issuer.

Thursday, Oct. 2
Posted 8 a.m.

Bank mergers and you

Bankrate reporter Leslie McFadden contributed this entry.

Over the course of the last two weeks, Washington Mutual and Wachovia credit cardholders have certainly heard they will soon have new issuers, whether they like it or not. JP Morgan Chase bought WaMu's banking assets and customer deposits from the Federal Deposit Insurance Corp. after it collapsed -- the largest bank failure in U.S. history. Citigroup agreed to purchase Wachovia's banking operations.

"As a result of the deal, Chase becomes the number one credit card issuer (in terms of outstanding loans) in the United States," Chase Card Services spokeswoman Tanya Madison wrote in an e-mail to Ellen Cannon.

Bank spokespeople couldn't provide many details, but this is what they did say with regard to existing credit card accounts at WaMu and Wachovia:

"It's business as usual for WaMu customers," says Madison. "They'll continue to use their same cards, online banking tools and customer service phone numbers and mailing addresses."

At Wachovia, spokeswoman Mary Eshet echoed the business-as-usual response. "There are no immediate changes. Cards will continue to have the same terms and conditions and operate just as they have. After the transaction is complete, if there are any changes, they will be communicated well in advance to customers."

Of course, cardholders are not off the hook for outstanding balances. They must keep paying bills on time and sending them to the usual address until otherwise notified.

Account terms could change in the future, so try to pay down balances as much as possible.

As for rewards cardholders, it remains to be seen how accumulated points will be treated. "I think it is likely they will be preserved," Wachovia's Eshet says.

Read correspondence that comes from either issuer -- what looks like junk may be important. A single late or missed payment could hammer your credit scores.

Comments? Questions? E-mail plastic_rap@bankrate.com.

Monday, Sept. 29
Posted 2 p.m.

Credit limit downsized?

Greetings. I'm Leslie McFadden, the reporter who covers credit cards for Bankrate.com. Dwindling credit card limits are a thing of the present. We want to know if those with good credit have been stung yet.

A story from yesterday's Wall Street Journal indicated that credit card limits are getting slashed across the board. People with good credit are no longer safe.

A large number of credit card issuers are indeed cracking down on credit limits. A July 2008 report from Javelin Strategy & Research found that "more than 60 percent of credit card issuers are constricting lines of credit to existing cardholders." Meanwhile, the July issue of the Federal Reserve Board's Senior Loan Officer Opinion Survey on Bank Lending Practices reported that "large net fractions of banks" said they had lowered credit card limits within the previous three months

While it comes as no surprise that banks are scaling back the lines of credit of risky borrowers, why would they alienate low-risk cardholders? Has the credit crunch pushed issuing banks to punish every cardholder, regardless of risk?

Lowering a person's credit limit hikes their debt-to-limit ratio, or utilization. Utilization accounts for 30 percent of the FICO credit score. Because credit scores can suffer when utilization increases, a lower credit limit could damage your credit scores.

The lower your balances, the better it is for your credit scores. Fair Isaac says there's no magic threshold above which your credit score plummets, but many experts recommend charging less than 30 percent of a card's limit. If your issuer lowers your credit limit, say from $5,000 to $3,000, you should charge no more than $900 on the card, even if you pay off the balance each month.

Lowering your limit also increases the probability of your going over the limit. Watch your mail and check your statement to make sure your limit hasn't gone down.

We want to hear from readers whose credit card issuers have trimmed their limits despite great credit scores. What was your credit limit before and after? What reason, if any, did your credit card issuer provide for the limit reduction? What was your credit score at the time?

Comments? Questions? E-mail plastic_rap@bankrate.com.

Monday, Sept. 8
Posted 2 p.m.

Higher minimum better?

As part of the bankruptcy bill that went into effect in 2005, credit card companies are required to charge a minimum payment of 4 percent. At the time, that produced outrage from various consumers and consumer advocates, because it was nearly doubling the previous minimum required.

In England, the minimum payment has recently been reduced to 2.53 percent from 2.65 percent. A report published last week says the average British credit cardholder will need 30 years and 11 months to pay down their debt.

I did a calculation to see how long it would take the average cardholder in the U.S. to pay off their debt. According to TransUnion's quarterly survey of credit card debt for the first quarter of 2008, published in June, the national average credit card debt was $1,673, down from $1,694 from the previous quarter.

(An aside: Alaskans carry the highest credit card debt, at $2,378. You'd think they'd use their annual $1,200 Alaska Resource Rebate to pay that down!)

Using the Bankrate credit card pay down calculator, I input $1,673 credit card debt and an interest rate of 11.57 percent -- the current average for variable rate cards, according to the Bankrate weekly Interest Rate Roundup.

Using the 4 percent minimum payment, it will take the average cardholder 29 months to pay off that credit card debt.

We hear it said that Americans owe more than $8,000 in credit card debt ($8,940 to be exact), but that's misleading. Personal finance columnist Liz Pulliam Weston did a great column dissecting this number, showing why it's inaccurate. Still, more than $1,600 in debt is enough -- especially since that's per card, not per person.

Comments? Questions? E-mail plastic_rap@bankrate.com.

Thursday, Sept. 4
Posted 8 a.m.

Two surveys rank cards

J.D. Power and Associates and Consumer Reports each issued the results of their annual credit card surveys this week.

On Tuesday, Consumer Reports named its best cards in various areas. For low rates and low fees, they chose Capital One Platinum Prestige, Clear from American Express and Iberiabank Visa Classic. For cash-back, they chose Capital One No Hassle Cash Rewards, Chase Freedom Visa and Discover More. The ones to avoid are First Premier Bank, HSBC American DreamCard and New Millennium Visa or MasterCard. (Bankrate covers the First Premier card but not the other two in our weekly research. It's listed under the cards for bad credit.)

Just anecdotally, I've heard from many readers over the past couple of years that I've been writing this blog that they like the Chase Freedom and the Discover More cards. AmEx Blue for Cash is also a very popular choice.

And that brings me to the J.D. Power survey of customer satisfaction among credit card companies, which is topped by American Express for the second year in a row. For "transactors" -- what J.D. Power calls those who simply use the credit card for purchases and pay off the balance each month (whom we know are called "deadbeats" or "freeloaders" in the credit card biz) -- they like rewards and they rank AmEx, Discover and Chase as the top issuers.

Revolvers -- those who carry a balance -- liked AmEx, US Bank and Discover. Not surprisingly, the survey found that transactors were more satisfied with their credit card company than revolvers and are twice as likely to remain loyal to that card.

Happy birthday today to Mike Piazza, one of my all-time favorite baseball players. I like him so much I named one of my cats after him -- which is a huge compliment.

Comments? Questions? E-mail plastic_rap@bankrate.com.

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