The new credit card law came out and its supposed to force credit card companies to be nicer to cardholders right? Here’s a look at the bill and some its highlights.
So for the average person who got himself into too much debt and couldn’t pay it off, this is probably a good thing. But what about the person who uses credit cards in a more responsible way. Never missed a payment and almost never carried a balance? You think the credit card companies would like to have this person using their card right?
Small businesses had to turn somewhere when times were tough and banks weren’t handing out loans. Many turned to credit cards as a source of short term financing. This meant getting close to the limit at times and utilizing many features like no interest on balances, six month cash advance, etc. If you have ever seen anyone who can manage multiple credit cards using different cards with varying balances and promotions while never missing a payment, I assure you it is quite impressive and became almost a necessity when banks turned their backs.
Recently, from someone I know, I learned that they were receiving downward revisions on all credit card limits. A limit of $25,000 became a limit of $18,000, a limit of $20,000 became a limit of $12,000, etc. This effectively cut the availability of credit! The reasoning was credit agencies determined that this person used a large percentage of available credit and had too many active cards. All this for someone who never missed a payment and almost never carried a balance.
This person isn’t alone. Several people I’ve talked to had to turn to their credit cards to survive, with many failing in the process. While this credit card reform might have been a good thing for the average person, small businesses are really feeling the change in policy. Where will small businesses turn when banks aren’t lending now?
