In recent months, several of the largest credit card issuers have begun the process of transitioning customers who carry fixed rate credit cards to variable rate cards. Does this mean that the days of fixed rate credit cards are near an end?
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Both consumers and banks are continuing to feel the economic pinch, as credit card chargeoffs rose to over 10% for the first time ever. According to Moody’s, their chargeoff rate index rose to 10.62% in May versus 9.97% in April. In addition, TransUnion reports that 1.32% of credit card users were at least 90 days delinquent in the first quarter of the year, representing an 11% increase from a year ago. The Federal Reserve confirms this trend, reporting that 6.5% of credit card debt was at least 30 days delinquent in the first quarter, the highest number ever reported. Overall, analysts estimate that credit card losses could surpass $70 billion for the year.

While they are reluctant to admit it, this sobering backdrop has caused banks to switch up their strategies. Card companies are now increasingly willing to negotiate with consumers who have outstanding delinquent balances, in an attempt to salvage at least a part of what they are owed.
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New credit card rules designed to protect consumers from being charged excessive fees and rates without warning were signed into law today by President Obama. While many of the changes in the The Credit Card Accountability Responsibility and Disclosure Act were already put into place by the Federal Reserve in December, those rules weren’t set to take effect until July 2010. The newly signed bill will require that some changes be made by mid-August of this year, with the rest of the changes being implemented next February.
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Based on a survey of the ten largest banks in the ten largest markets, Bankrate.com found that credit card interest rates continue to climb. Overall, the survey found that the average APR of variable interest rate cards rose from 10.70% to 10.78%. The segment that experienced the highest rate increase was low-interest rate credit cards, which saw average APRs rise to 11.70%, up from 11.62% last week. This hike represents the largest weekly increase in over two months.
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In what is likely to be the largest data breach ever reported, Heartland Payment Systems, the sixth-largest credit card processor in the US, announced on Tuesday that its computer systems had been compromised and millions of credit card numbers had been exposed.

While Heartland says that it has closed the security hole, it is not yet known the extent of the data that was taken. Since Heartland processes 100 million transactions per month, the number of affected consumers could be huge. (Read more details in the Forbes article.)

This latest news is just another reason to monitor your monthly statements closely.

As expected, federal regulators have approved a rule aiming to stop “unfair or deceptive” credit card practices. The Office of Thrift Supervision, Federal Reserve and National Credit Union Administration today approved a rule set to take effect in July 2010 that restricts issuers’ ability to raise interest rates and how they apply payments to existing balances.
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Facing the greatest financial crisis of the generation, lenders are taking a number of actions to mitigate their risk. In addition to slashing credit limits, credit card issuers are reacting by aggressively closing inactive accounts, hiking rates and fees, and even completely eliminating balance transfers and convenience checks.

As the end of the year nears, it’s especially important to carefully read your credit card statement, as issuers are cramming all sorts of new changes to your agreement–with many of those changes resulting in increased rates and fees. Here are a few of the recent changes I’ve noticed in my agreements:
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Citi has its Diamond Preferred Credit Card and every bank has a gold card, but leave it to Kazakhstan–the home of fictitious journalist Borat–to actually put diamonds and gold in a credit card.
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If you thought that credit was becoming harder to get, you’re not imagining things. And if your credit card issuer recently cut your limit despite a pristine credit history, you’re not alone.

The Fed just released its October 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices which showed that banks have been progressively tightening their lending standards and have now begun to cut credit limits on existing credit card accounts even for prime borrowers.
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More tangible signs of the credit crisis are appearing every day. Several new reports came in the past week, which collectively paint a grim picture of the immediate future for the credit card industry.
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