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Credit Score-Ravaging Notices Sent as Junk Mail

By Sally Maison
Published: Thursday, December 24th, 2009

Like all other creditors, card issuers are after making the most of what they lend. As federal government places a tighter grip on the lending industry, banks are scrambling to preserve profit by increasing rates, changing policies, and charging new fees. Unfortunately, many consumers are not aware of these changes since they disregard mail notices sent to them by their banks.

Credit Score-Ravaging Notices Sent as Junk MailThis new CARD Act takes full effect February next year that is why banks are hurrying to set new rules while they still can. Before they can implement changes, banks are required to inform consumers through mail. However, industry specialists note that cardholders often disregard these mailings, causing them to lose hundreds, and even thousands, of dollars. Moreover, it could hurt their credit score without knowing it, which is a very important number in a credit-driven economy.

Cardholders are given the choice to opt out of those changes so they can avoid additional costs, experts note. However, they add that consumers can only do so if they read the mail sent to them.

As observed by industry specialists, most card company notices have very small prints that consumer’s think they are junk mails. However, experts advise consumers to carefully read any mail sent to them by their creditor since it is very likely to contain important changes regarding their accounts. Also, cardholders are warned that such mailings can be very hard to understand and may use legalese.

Specialists explained that banks do so because they are only required by law to inform consumers of significant changes, not to explain everything to them. To avoid confusion, experts advise consumers to focus on key changes instead of trying to understand the whole letter.

Consumers are advised to first look for changes in their annual fees or interest rates. Specialists expect that many card issuers will change fixed-rate cards into valuable rates or the interest rates of their clients. So far this year, the most dramatic increase industry watchers noted is the charging of 29.99 percent interest rates by Citigroup to a select portion of its cardholders. Some clients bemoaned that they cannot close their cards yet because it will surely hurt their credit ratings.

Meanwhile, those who do not want to shoulder higher rates may opt out, but their accounts will most likely be closed. Though their credit score will surely suffer, they will at least be able to pay off their balance at the current interest rates.

Another change that is hurting consumer credit score is the lowering of credit limits. However, experts say consumers can solve this problem if they cut back on their purchases and focus their spending on necessities alone.

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