Credit Cards Are Changing Terms

Correction:  Thanks to a commenter and my friends at USAA, I’ve verified that my original post was wrong.  USAA is not eliminating rewards on credit cards, just debit cards.  Whoohoo.  I’ve updated the post to reflect accurate information.

One subtle effect of the entire recession/financial meltdown/current economic mess is that credit card companies are changing the terms and conditions of their cards.  Many changes have been as the result of federal legislation.  Other changes have been the result of decreasing card revenues.  Cardholders who diligently chose the best (for them) card three years ago may find that their current credit card is no longer the right financial tool for their particular situation.

Changing laws, poor economic climate, and even the downgrading of the US debt rating are all impacting bank and credit union revenues. I have heard tons of stories of cards instituting new annual fees, reducing or eliminating rewards, and tightening leniency on late fees, over-limit fees, etc.

How should a consumer react when their credit card issuer informs them that they are changing the terms of their account?  First, don’t panic. Consider whether it is still a good card for you. Ask yourself these questions:

  • How many cards do I have?
  • How many cards do I need?  (I recommend 2-3, max, but that’s just my opinion.)
  • Do I carry a balance?
  • Is there an annual fee?
  • Does this card offer any extra protections or services?
  • Does this card have any particular features that are helpful for me?
  • Are there any rewards with this card?
  • How is the service from the card issuer?
Once you’ve thought about all these things, you can see what other cards might be available.  I always recommend looking to reputable banks and credit unions for the best terms and service.  With options in hand, you can figure out if your current card is still the right card for your current situation.
If you do decide to change companies, consider the impact on your credit score.  Closing an old account can impact your credit score, and lowering your total available credit can also hurt you.  However, keeping a bunch of non-used accounts open can be a security issue, plus some lenders feel that too much available credit is a bad thing.  There’s no right answer for everyone, unfortunately.
Things in the world of credit cards are changing.  This is a great opportunity to review your current credit accounts and ensure that they are working for you, not against you

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.