An offer you CAN refuse: Say no to bad credit card deals

From Chuck Jaffe at MarketWatch:

The Credit Card Accountability, Responsibility and Disclosure Act (widely known as the Credit CARD Act) takes effect in February, although a few key provisions kick in at the start of August. One of the key provisions that begins in August requires credit-card issuers to give 45 days' notice before any rate hike.

As a result, many card issuers are tinkering with rates now, to get in under the wire, leaving consumers struggling with how to properly respond. No one wants to accept a rate hike, but they fear being cut off from available credit, even if their credit score is good....

In effect, these consumers are protecting their credit score over their pocketbook, a move that might make sense if there's a need for a mortgage or car loan or other big-ticket, financed item in the next eight- to 12 months, but which is costly for anyone whose situation is stable.

If your situation is stable, best thing to do is tell your credit card company: "No deal - I will not accept an increased rate." In that case, the company will let you keep paying the old rate, but will close your account so you can't make any new purchases.

More from Jaffe:

Consumers with scores below 700...may be forced to settle for lesser deals. People with high scores above 740 are in the driver's seat, even though they have not been immune to limit reductions, card closings and rate hikes.

"If you are going to get a mortgage, you may want to sit tight until the mortgage closes, but if you are not in the market for a mortgage right now, then you should try to minimize your costs and shift your balances to lower-rate products, rather than taking only what your current lenders give you," said Gerri Detweiler, co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights.

"It is possible to get new cards and deals right now," she added. "In fact, if you don't have a back-up card right now, I would recommend that you go get one, so that if the credit cards you are relying upon do something you don't like, you have negotiating leverage or the ability to go elsewhere."

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Joseph Slife is a contributing author and editor for SMI. Visit www.soundmindinvesting.com to learn more.