It's more important than ever to pay attention to your credit card accounts. Lenders across the country are curtailing credit card offers and credit limits, and UW Madison professor of consumer science, J. Michael Collins, says there's a good reason for that. "For a long time, people have been able to use their home equity as a way to pay off their credit card debt," says Collins. "That no longer exists, so credit card companies are responding to the changes in the housing market. It just shows how all these parts of our economy are so interlinked."
In fact, lenders wrote off an estimated twenty one billion dollars in bad credit card debt in the first half of this year alone. In response, they're also often increasing minimum monthly payments and late fees. Collin says that means you need to pay attention. "Make sure you know what the current conditions are. I think most of us just pay the bills every month and don't pay a lot of attention to the details. But it's becoming more important every month to make sure you understand what the current conditions are on that card. And, Collin says you need to be proactive and patient. "If you have a lowered limit, if you end up paying a fee that you weren't aware of, or an interest rate that you weren't aware of, do call," he advises. "Some patience on the phone, waiting to talk with a customer service representative, might pay off."
We've been told for years about our abysmal savings rate and over reliance on credit cards in the U.S., and Collins says there's a lot of truth to that. "Credit cards are really a mechanism to facilitate us to spend more, and so using a credit card less is probably a good thing," says Collins. "That said, for some people it is a very valuable tool. For a lot of us it's a way to not have to carry around cash, and that's fine as long as you pay off your balance every month."