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If you haven't been paying attention to your credit card bills lately, brace yourself. The news isn't good.
Credit card profits are being squeezed by rising defaults and waning spending. As a result, issuers are tightening the screws on consumers.
Among the wallet-busting trends for cardholders: Interest rates are climbing, balance transfer costs are going up and rewards are getting harder to earn.
Issuers of credit cards are required to make available to each customer an estimate of how long it will take to pay off a card's balance if he or she makes only minimum payments.
For credit cards issued by banks, which covers nearly all credit cards, estimates are available by calling the payoff information number on billing statements.
For nonbank-issued cards, estimated payoffs are available by calling the Federal Trade Commission at 1-888-600-4804 or by using the agency's online calculator at ftc.gov/creditcardcalculator.
According to the online calculator, a person carrying a $10,000 balance with an annual interest rate of 15 percent who makes no more charges and makes the minimum payment on time each month will shell out $3,281 in interest and make payments for 10 years before the balance is paid off.
What's more, issuers have been tightening credit standards as the credit crisis in the banking industry drags on. That means people without good credit looking for new cards are having a hard time finding them, experts say.
Banks overall are hurting, so they are turning to all segments of their business to boost profits. At the same time, credit card delinquencies are rising, and people hit by the recession aren't using their cards as much.
"It's almost the perfect storm" for hitting up consumers, said Bill Hardekopf, CEO of the credit card comparison Web site Lowcards.com.
Take interest rates. In general, interest rates on mortgages and other loans are hovering at historical lows. Nevertheless, a growing number of credit card issuers have been raising rates.
"If you, as a consumer, do anything to show that you are a higher credit risk, you will almost surely be in for an increase in your interest rate or decrease in your credit limit," Mr. Hardekopf said.
Being late on a payment, missing a payment, exceeding the card's credit limit or using too much of the credit line can trigger an immediate rate hike, sometimes up to the so-called default rate of 30 percent or more.
But even customers with great credit who have never been late on a payment are seeing their rates rise, said Curtis Arnold, founder of Cardratings.com.
He said one of his co-workers recently had a rate increase on a card he hadn't used in years, one that even carried a credit balance.
"We've seen rate hikes over the years, but nothing like this. It's been unprecedented," Mr. Arnold said.
On the fee side, the news isn't much better.
Not too long ago, 12-month, zero percent teaser rates on balance transfers were everywhere.
Today, the majority of balance transfer offers carry annual interest rates in the 3 percent to 4 percent range and are good for only three to nine months.
Credit card issuers have been curtailing cash-back and other reward programs in an effort to boost the bottom line. Here are some suggestions from online credit card reviewer CreditCards.com for fighting back:
• Redeem now. If you have already earned a lot of points, redeem them sooner rather than later. The redemption value is largely hidden and can be changed by the card issuer at any time.
• Be selective. Choose a reward that fits the type of spending you do, such as earning extra points for grocery, gas and drugstore purchases. Be wary of rewards that end up requiring you to spend extra money, such as getting a gift card to a store that sells only expensive items.
• Consider cash-back cards. Cash rebates, although less flashy, are fairly straightforward in terms of how they are earned and what they are worth. And there are no blackout dates.
• Stay on top of hidden fees. Be sure to read the fine print of the reward program's terms and conditions. Beware of expiration dates on points or miles, and know that terms are subject to change with little or no notice.
• Practice monogamy. Be true to one credit card to maximize your rewards-earning potential. Select a card that has a low interest rate and no annual fee, then do all your spending with that card to reap the most rewards.
• Double Down. Consider adding your spouse as an authorized user on your account to leverage all of your household card spending and increase your reward-earning power.
• Skip reward cards if you consistently carry a balance. Reward cards tend to charge higher interest rates, making them too expensive for revolvers. Instead, focus on finding a card with the lowest rate.
What's more, it's become the norm to impose a balance transfer fee. The typical charge is 3 percent of the balance, but that soon could be going up, too.
Bank of America is in the process of raising its balance transfer fee to 4 percent, a move that other major issuers are likely to follow, Mr. Hardekopf said.
Card companies also have been scaling back in recent months on freebies offered by reward cards, which earn points redeemable for cash, merchandise or other goodies such as airline tickets or hotel rooms.
Still, the changes haven't been as dramatic as the boosts in interest rates.
For example, adjustments are being made to the "tiered" rebate structure on the Discover card that will curtail the amount of cash rewards customers earn on annual purchases under $3,000.
The popular Chase Freedom card also is getting stingier, with some customers no longer being offered the hefty 3 percent cash-back on certain purchases.
Reward adjustments typically apply to new customers, but existing accounts can be affected, too. That's why it's good practice to closely review monthly statements and any notices the card company sends.
Some industry experts surmise one reason for the wave of credit card adjustments is that card issuers are moving ahead of pending reforms set to take effect July 2010 that ban "unfair and deceptive practices."
Specifically, the new regulations issued by the Federal Reserve would limit card companies' ability to raise rates on existing balances, offer protections for consumers who pay on time, prevent issuers from applying payments so that balances with higher interest rates are repaid last and improve disclosures of terms and fees, among other changes.
Both the House and the Senate are working on legislation also aimed at curtailing card practices considered to be predatory. The rules could kick in well before the new regulations from the Fed.
Last week, President Barack Obama gave the legislation a big push by voicing his strong support of consumer-friendly reforms in a meeting with top executives in the credit card industry. The president also said he wanted to step up enforcement and penalties for violators.
Mr. Arnold called the meeting "historic."
"This momentum for reform is something we have never seen" in the credit card industry, he said. "Something will be done."
Mr. Arnold was hopeful that changes would not be too onerous on card issuers so they don't retaliate by restricting credit even more and raising rates across the board. "I think Obama is sensitive to that," he said.
In the meantime, cardholders hit by higher rates or fees should contact their issuers and complain. If the card company won't rescind the changes, shop around for another card.
"There are still some good deals out there," especially for people with good credit, Mr. Hardekopf said.
Credit card-reviewing Web sites such as Cardratings.com, Bankrate.com, Creditcards.com and Lowcards.com can help with comparison shopping.
Be aware that although the sites offer ratings and analysis, they accept fees from card issuers to prominently display certain cards.
