It’s tough to follow up on a post about how to make a Black and Tan, but I’ll give it a try. I was inspired to write by an interesting discussion over at the Consumerist about credit card rate hikes and credit line cuts. Many AFFIL members have written to us about this phenomenon, and we’ve also spoken with industry insiders who confirm that the issuers are cutting limits and raising rates even on long-standing good customers. (The Consumerist discussion got started because of this article in the New Yorker.)
Consumers with some financial cushion can probably wiggle around these credit card changes and come out unscathed. If their rate goes up they can pay off the card in full; decline the new terms, stop making new charges, and pay off the existing balance at the old rate; or transfer the balance to a different card.
But there are plenty of consumers who are, in the New Yorker’s words, “captive customers.”
They lack the savings to pay off credit card balances (which is why they have the balance in the first place) and need to use the card again for necessary expenses. Gone are the days when people could shuffle the balance off onto some other low-rate card, because new offers of cheap credit are no longer forthcoming. So if the car breaks down, there’s a new medical expense, or utility or grocery prices simply creep up, it’s the credit card which will have to make up the difference. Not to mention the role credit cards can play for laid-off workers trying to make ends meet.
This is the classic conundrum people face when their only financial security comes from the “plastic safety net.” At AFFIL we know plenty of people rely on this net (which is really a long term debt treadmill) because we’ve heard from real people in this situation. If you have a story we should know about, you can share it here.
(photo: Wikimedia Commons)