Your credit score is an important number…

1. Paying late: Thirty-five percent of your credit score is your payment history. Consistently being late on your credit card payments will hurt your credit score. Pay your credit card bills on time to preserve your credit score.

2. Having a balance charged off: When creditors think you’re not going to pay your credit card bills at all, they charge off your account. This account status is one of the worst things for your credit score.

3. Having an account sent to collections: Creditors often use third-party debt collectors to try to collect payment from you. Creditors might send your account to collections before or after charging it off. A collection status shows that the creditor gave up trying to get payment from you and hired someone else to do it.

4. Defaulting on a loan: Loan defaults are similar to credit card charge-offs.  Defaults show you have not fulfilled your end of the contract.

5. Having your home foreclosed: Getting behind on your mortgage payments will lead your lender to foreclose on your home. In turn, the late payments will hurt your credit score and make it harder to get approved for future mortgage loans.  Late mortgage payments are worse than late credit card payments.

6. Getting a judgment: A judgment shows you not only avoided your bills, the court had to get involved to make you pay the debt. While they both hurt your credit score, a paid judgment is better than an unpaid one.

7. High credit card balances: The second most important part of your credit score is level of debt, measured by credit utilization.  Having high credit card balances (relative to your credit limit) increases credit utilization and decreases credit score.  A maxed out card is the worst.

8.  Closing credit cards that still have balances: When you close a credit card that still has a balance, your available credit drops to $0 but your balance remains. This makes it look like you’ve maxed out your credit card, causing your score to drop.

9. Closing old credit cards, especially those with available credit: Another component of your credit score, 15%, is length of credit history – longer credit histories are better. Closing old credit cards, especially old cards, makes your credit history seem shorter. Also if you have several credit cards some with balances and some without, closing those credit cards without balances increases credit utilization.

10.  Applying for several credit cards or loans: Credit inquiries account for 10% of your credit score. Making several credit or loan applications within a short period of time will cause your credit score to drop. Keep applications to a minimum.

11. Having only credit cards or only loans: Mix of credit is 10% of your score. When you have only one type of credit account, either loans or credit cards, your credit score could be affected. This factor mostly comes into play when you don’t have much other credit information in your credit history.

NO MORE Mortgage Tax Update

IRS STOPS MAILING OUT FORMS…

The Internal Revenue Service says it will no longer mail out tax packages with forms and instructions for filing a paper return. The change comes as an increasing number of taxpayers are filing their returns electronically. In early October, taxpayers who filed paper returns last year should have gotten a postcard from the IRS with instructions on where and how to get the forms needed for filing 2010 returns. In short, the forms will be available in January from the IRS website or at select libraries and post offices.

The IRS says people who file electronically can get refunds deposited directly into their bank accounts in as little as 10 days. Otherwise it can take up to six weeks to get a refund check in the mail.

The IRS says the move will reduce mailing costs. But the change also reflects changing habits; the majority of individual filers now file electronically. Just 8 percent of individual taxpayers got paper forms and instructions in the mail last year. The rest either filed electronically or used a paid tax preparer or software. Taxpayers can file returns electronically for free on the IRS website, www.irs.gov . The agency also gives free electronic filing help to those who earn $58,000 or less through a program that walks taxpayers through their returns by asking a series of questions about income, expenses and other financial transactions.

Signs You’re Headed Toward Accumulating Credit Card Debt…

How do you know if you’re using your cards unwisely? NO MORE Mortgage presents some ways to tell you’re on the path that will create more and more credit card debt. Here are 10 signs that you are headed toward accumulating credit card debt from NO MORE Mortgage.

1. You use credit to meet basic needs: Your income should be used to buy everyday items like food, clothing, and gas. Having to use credit cards to cover these types of purchases is a big sign of financial trouble.
2. You transfer balances to avoid credit card payments: There are times when a credit card balance transfer makes sense, like to consolidate credit card balances or to get a lower interest rate. However, frequently transferring balances instead of making credit card payments is a red flag.  The fees to make these transfers are often higher than the monthly payment you might be trying to avoid.
3. You skip one credit card bill to pay another: Prioritizing credit card payments is wise. But skipping payments is always unwise. If you consistently find yourself too strapped for cash to make your credit card payments, you are already in credit card trouble.
4. You avoid or ignore credit card statements: If only wishing away credit cards actually made them go away. Pretending your credit card debt doesn’t exist only gives it time to grow. Facing credit card debt sooner gives you the opportunity to tackle debt before it gets out of control.
5. You charge more than you pay: Imagine trying to fill a hole while someone shoveled out more dirt than you put in. Your hole would never get filled would it? It’s the same with debt. If you’re charging more than you’re paying, your credit card debt will always continue to increase.
6. You don’t have an emergency fund: If you don’t have an emergency fund, you’ll feel forced to use your credit card for every little item that is out of the ordinary. Credit card debt created because of  unexpected expenses can be hard to pay off, especially if your budget is already stretched.
7. You don’t have a plan to pay off your credit card debt: You know what they say, “Failing to plan is planning to fail.” If you’re not actively working to pay off your credit card balances, you could end up unnecessarily paying on the cards for years to come. Whether you have excessive credit card debt or not, you should always have a plan to pay off your balances.
8. You use credit to “afford” expensive items: The allure of credit is that it tricks us into thinking we can afford to buy more than we really can. Truth is, only extra income or lower expenses (or both) enables you to afford more expensive items. Incurring credit card debt to maintain a lifestyle you really can’t afford isn’t a losers game.
9. You have past due accounts: If you have credit cards that are currently past due, you’ve probably run into unfortunate financial trouble that’s keeping your from making payments. Remember, the more in arrears your accounts become, the harder it will be to bring them current again. Take a look at your monthly budget for money you could find to get your credit accounts back on track.
10. You have maxed out credit cards: If your credit cards are all maxed out, you’re not headed for credit card debt, you’re already in deep. What now?  Make a decision to pay off your credit card debt or take more severe steps to get rid of them, even if it hurts your credit.  You must learn to make wiser choices about credit card use in the future.

STRETCHING YOUR BUDGET PAST AGE 55…

Of the 14.9 million unemployed, more than 2.2 million are 55 or older, according to the U.S. Labor Department. And almost half of those have been unemployed six months or longer. The unemployment rate in that age group is a record high 7.3%.  NO MORE Mortgage shares how you can make every dollar count.

1. Retirement Accounts: If you have no choice but to dig into your retirement account, there are ways to minimize the tax hit and penalties.  Most people know that if you withdraw money from an individual retirement account or 401(k) before age 59 ½, you’ll pay federal income taxes on the withdrawals AND you will get hit with a 10% penalty. But the tax code has a provision, 72(t), that allows someone younger than 59 1/2 to withdraw a set amount of money at least five times until age 59 1/2 or for five years, whichever is longer. You won’t pay a penalty, but the money is still taxed. The caveat: Once you start taking out the money, you’re locked into making withdrawals, says Jerod Wurm, a certified financial planner in Sacramento. Jonathan Pond, a financial adviser for AARP, says that if you were laid off this year, you might want to delay tapping your retirement money until next year, when you might be in a lower tax bracket. If you need a chunk of money for a short period of time, consider the 60-day rollover requirement. This rule allows you to take money out of a qualifying retirement account, tax- and penalty-free, once a year, regardless of your age — but the full amount must be deposited back into the account within 60 days.
2. Health Insurance: Most states have programs that offer low-cost coverage, typically if one earns less than $30,000 a year. The MassHealth program in Massachusetts, for example, covers adults and children under age 19 if they live with the parents. Short-term insurance policies, which typically cover unexpected illnesses and accidents, can run as low as $30 per person for a month. Catastrophic insurance typically starts as low as $30 a month depending on a person’s age and health. Have you been denied coverage or been quoted an exorbitant rate because of a pre-existing condition? You can enroll in the federal Pre-existing Condition Insurance Plan, a part of the new health-care law. Premiums range from $320 to $570 a month per person depending on the state.
3. Real Estate: The typical advice is to downsize to a cheaper home in a cheaper locale. But today’s real-estate market is anything but typical. And for people who are hunting for work or have a spouse with a much-needed job, moving to a state with a lower cost of living may not be feasible. So use your home to make some extra cash. If you live near a college or university, for instance, rent an extra room to a student or recent graduate. You can easily get a few hundred dollars a month. Contact a school’s student-housing department or put up fliers on campus. For homeowners who are 62 and over and still have equity, another option is a reverse mortgage, which allows older homeowners to tap their home’s equity while they remain in the house. The loan typically doesn’t come due until the homeowner sells the house or dies. And upfront fees have come down some recently.
4. College Expenses: Still on the hook for college tuition for your kids or yourself? Try renegotiating loan and aid terms. Jerome Chester, a 51-year-old from Bethesda, Md., who has been unemployed since June, went to student-loan provider Sallie Mae to renegotiate his tuition loan. He was able to defer payments, about $1,000 a month, for six months. And a school’s aid package isn’t always set in stone. Go back to the school and ask for more aid given your financial troubles. Results will vary by school and a family’s financial status.

NO MORE Mortgage helps with homeowners insurance

EXPERIENCED AN INCREASE IN YOUR MORTGAGE PAYMENT?…

Homeowner’s insurance rates have been increasing in almost every state, which has caused many NO MORE Mortgage clients to see an increase in their mortgage payment because their escrow amount increases.  This overall increase in homeowner insurance rates is caused by a variety of factors, but it appears that this trend is not going to reverse in the near future. We have asked Heritage Insurance, Inc. to work with NO MORE Mortgage customers that would like to reduce their homeowner’s insurance premium.  They will not be able to save every customer on their homeowner’s policy, but it appears that the vast majority will be able to realize some savings, and some could see very significant savings.

For those of you that are interested, Heritage will review your current policy and then offer quotes from other insurance companies.  This is a free service.  They are a national broker that sells for 127 different insurance companies.  Some of these companies are large nationwide companies (Traveler’s, Safeco, The Hartford, Progressive, etc.) and some are smaller, regional companies.  This review will allow you to see a variety of prices and determine if you can reduce your insurance premium by switching to another carrier.

For those of you that are interested in trying this service using the resources of Heritage, we have pasted a link to The Better Business Bureau’s report on their company at http://www.bbb.org/louisville/business-reviews/insurance-services/heritage-insurance-service-inc-in-louisville-ky-3067. They have been an accredited BBB business since 1979.

Call now to receive your policy review at 888-782-1391, or you may send an email to chris.oneill@nomoremortgage.com.  There is no cost or obligation.  The analysis can be sent to you via email, and no salesman will call.  NO MORE Mortgage has a strict privacy policy that prevents us from giving our client information to any third party.  This is a free service available only to NO MORE Mortgage customers.

Related posts:

1. October 2010 NO MORE Mortgage Newsletter
2. Right Way to Break Up With Your Credit Card
3. How Credit Cards are Stealing from the Poor to Feed the Rich

NO MORE Mortgage is asked from time to time about debt settlement companies.  While we do not negotiate with creditors or hold client funds in our custody, we can recommend a reputable third-party firm to help those of you in financial crisis.

You can always call your NO MORE Mortgage Plan Coordinator for a review of your financial options. We can discuss the pros and cons of debt settlement vs. NO MORE Mortgage, along with Consumer Credit Counseling and Bankruptcy, to help you honestly evaluate your choices. Learn how NO MORE Mortgage is different from debt settlement here.

Having a trusted 3rd party counselor in a tumultuous time like this can be lifesaver.  NO MORE Mortgage is happy to help.  Please read the article below that summarizes the industry.  A second post will discuss the risks and the consequences of choosing debt settlement.

If you’re drowning in unpaid bills and desperately looking for a way out, chances are you’ve come across an offer that sounds something like this: For a fee, a professional debt-settlement company will help eliminate your debt for as little as half the amount you owe.

Does this sound like a scam? Or are you finally getting the break you deserve? The answer may surprise you. Debt settlement is, in fact, a perfectly legal solution for consumers who are in deep and seeking an alternative to bankruptcy. But having a debt-settlement company do the legwork for you can be risky and expensive.

The Basics on Debt Settlement vs. NO MORE Mortgage

If you are falling further and further behind on your payments, creditors would much rather agree to settle your debts than have you file bankruptcy and not get paid at all.

For an agreed-upon one-time fee, usually between 10% and 60% of what you owe, your creditor eventually forgives the rest of your debt and starts reporting the account to the credit bureaus as settled, or paid as agreed. On your credit report, the balances of settled debts will show $0. However, any previous history of delinquent payments or charge-offs will remain for all to see.

In order to get your creditors to do this, you’ll need to start putting money aside toward the settlement, and you do this by stopping payments to your creditors.

Not surprisingly, creditors don’t like to advertise debt settlement. They also make it an extremely difficult solution to pursue. As a rule, creditors won’t negotiate with consumers who are current on their bills, usually refusing to discuss settlements unless you’re at least three to six months behind. That means you will have to dodge collection calls while trying to save up the cash for a settlement.  This is one of the little known downsides to the whole process.

If you’re working with several creditors — you’d typically tackle the debts one at a time as you collect the money to pay them off, but it’s hard, if not impossible to know which creditor might fall out of line and attempt to sue you, or which one will be willing to settle first. In the experience of NO MORE Mortgage, clients who have hired debt settlement companies do not really do much better than if they had done the negotiations themselves.  What they are buying when they hire a third party to represent them is avoidance of the stress of negotiating.

Once you sign up with a company, chances are you’ll pay dearly for its services. Again, in the experience of NO MORE Mortgage, these fees are all over the place.

Some companies charge a percentage of the total debt — typically 15% to 20% — that’s paid before you start accumulating savings. Others charge a percentage of the debt savings — usually 25% — once you settle, plus an initial sign-up fee and monthly service charges. Then there are those that charge a flat monthly fee throughout the length of the program.

(read more on this subject, including the downside of debt settlement, and our NO MORE Mortgage commentary on the consequences and experiences that our clients have had when they have chosen this solution.  In our opinion, it’s all of the bad, and none of the good)

Learn how NO MORE Mortgage is different from debt settlement here.

Will the NO MORE Mortgage Financial Plan work for me?

To find out if you qualify today!

Find out what thousands of satisfied clients already know about taking control of their finances, and using the power of reverse compounding interest to beat the banks at their own game! NO MORE Mortgage Representatives are standing by to answer all of your questions about our program, including how soon you will be debt free, and how much money you will save in interest!

Related posts:

1. NO MORE Mortgage Plan vs. Debt Settlement
2. NO MORE Mortgage: What You Should Know about Consumer Credit Counseling
3. Do you really know how much you owe on your debt?

NO MORE Mortgage specializes in assisting clients who are able to meet their monthly debt obligations.

Sometimes when financial reversals hit, or spending has simply gotten out of control, we are forced to admit that our financial inflow is not equal to our outflow.  We are simply spending more than we earn.

If this trend is not stopped, and credit cards are maxed out, and there is nowhere else to borrow money, the ultimate consequence is that our finances “hit the wall,” and we simply run out of cash.  We are insolvent.

If you are reaching a “breaking point” similar to the one described above then NO MORE Mortgage may not be the answer for you. There are, however, three main solutions that can be considered.  One is bankruptcy.  Another is Debt Settlement.  A third is consumer credit counseling.

NO MORE Mortgage is not a credit counseling firm.  There is a big difference between NO MORE Mortgage and the other debt elimination categories described above.

• NO MORE Mortgage does not handle client funds.
• NO MORE Mortgage does not negotiate with creditors to lower balances, interest rates, or monthly payments.

If you are considering credit counseling be sure to spend some time researching your options before signing up with an agency that you do not know much about.  Most people are not familiar with their options and the programs available, and when money is tight, emotions are usually running high, and it’s easy to make a bad decision.

There are many credit counseling agencies to choose from.  Knowing what to look for is key to your success.  Reputable agencies will provide you information upfront about their company without you having to provide any of your own personal identifying information.

Your task in choosing the right agency is to be sure that you do your homework. NO MORE Mortgage can help you make the right decision.  Here are our recommendations:

• You should interview at least two agencies.
• After you receive your initial consultation, you should contact the Better Business Bureau or your State Attorney General to see if there have been any unresolved complaints on the agency.
• Be sure the agency is charging you reasonable fees (not more than $50/month for a debt management plan).
• The credit counseling agency should be non-profit.
• The agency should have been in business for at least five years.
• The counselors at the credit counseling agency should be certified by an independent organization.
• The agency should be accredited.  The two major evaluators are the International Standards Organization (ISO) or by the Council on Accreditation (COA).
• The agency should be a member of one of the trade associations: either Association of Independent Consumer Credit Counseling Agencies (AICCCA) or the National Foundation for Credit Counseling (NFCC).
• The agency you are considering should be licensed and bonded to do business in your state.  This is an absolute requirement for your protection.
• The agency should be willing to waive or lower fees if you simply can’t afford them.
• The agency should spend a reasonable amount of time for your initial consultation. At least an hour is needed.
• The agency should provide you with a written budget based on your personal financial situation.

One of the most important points is to be sure that the agency offers free education to help you learn how to manage your finances. They should also provide you free ongoing education while on the debt management program, or even if you decide that the program is not right for you.

If an agency is not willing to answer your questions or you feel that the answers are not satisfactory, call someone else. NO MORE Mortgage can help by referring you to honest and effective agencies that we have dealt with for many years.  We get no referral fee or kickback for this service.

We know that when we get you to the right people to help you through your financial crisis, that you are likely to return to NO MORE Mortgage for help with eliminating the rest of your debt, including your mortgage.

Related posts:

1. Overcoming the Urge to Splurge with NO MORE Mortgage
2. 5 Evil Things Credit Card Companies Can Still Do
3. Are your emotions affecting your spending and building your debt?

We may feel the need to dine at an expensive restaurant in order to “celebrate” a specific achievement. Or we might go out and purchase a new outfit because we have been treated unfairly and we “deserve” to be pampered. Compulsive spending is usually an attempt to fill an inner emotional need, but the pleasure we feel from our shopping “spree” is only temporary, followed by guilt and the knowledge that we have only increased our debt load. This urge to splurge can eventually cause difficulties on a long-term basis. Not only will our financial stability be damaged, but relationships can also be jeopardized. Somehow we must recognize that our happiness and self worth will not come through spending.

NO MORE Mortgage can help you overcome the urge to splurge.

Security and satisfaction will come as we take care of essential needs and savings, before considering our wants. You may recognize yourself as a compulsive spender. Good for you! That is the first step to overcoming your urge to splurge. Asking yourself a few questions can help you to understand your emotional needs and how they play a role in your spending addiction.

What does money mean to you?

We tend to handle money situations the way our family did when we were growing up. Some might feel as though they missed out on opportunities as a child and want to make up for that now. Does money make you feel accepted, loved, important? When you think of acquiring more things does it bring you comfort or make you feel happier? Are you a procrastinator? Will there always be time to save for important future events, such as a home, vacations, education, or retirement?  Is paying off your debt an important priority, or does the thought of becoming debt free and having NO MORE Mortgage just seem too distant and unreachable?

Do you understand the cycle of your addiction?

Addictions form a cycle that is difficult to break. That cycle usually begins with a feeling of discouragement or negative self worth caused by unresolved issues. The compulsive spender believes that spending money will fill that emptiness and make them feel more worthwhile and complete. At the time they make their purchase they feel happy and fulfilled, but after, they are once again faced with their financial problems and their feelings of negative self worth.

Where does your money go?

Experts at NO MORE Mortgage agree that understanding where you are spending your money is one of the most important steps in learning to manage emotional spending.

A compulsive spender finds that much of their income is already spoken for by the required monthly debt payments resulting from previous purchases. While you are shopping, it is helpful to notice the cost of individual items as well as the amount of your total transaction. For one month, keep track of how much you spend. What areas seem to have the most transactions? For instance, does restaurants, clothes, or video games take over your budget?

What role do your emotions play?

Stop and think about the way you are feeling when you consider buying something. How do you feel immediately after the purchase is completed? Put a name to the emotions: excited, happy, fearful, guilty, sad, angry. How do you feel about the purchase later that day or the day after? How do you feel the next week? Add up your total spending for the month. Were your emotional needs met? Do you actually feel more successful, happy, loved, safe? Are there feelings of self doubt, worry, and fear because of the choices you made?

It can be quite helpful to understand that the urge to splurge has a direct connection with our emotional needs. Understanding that you have allowed your spending to have power over much of your life can make all the difference. By taking time to think about your emotional state before you make a purchase, you will be better equipped to overcome your addiction, leading you to a much more successful financial future.

For more information and to get a FREE audio CD call today. 1.800.285.9102

Will the NO MORE Mortgage Financial Plan work for me?

To find out if you qualify today! Find out what thousands of satisfied NO MORE Mortgage clients already know about taking control of their finances, and using the power of reverse compounding interest to beat the banks at their own game! NO MORE Mortgage Representatives are standing by to answer all of your questions about our program, including how soon you will be debt free, and how much money you will save in interest!

Related posts:

1. NO MORE Mortgage gives you a plan for your debt. What’s your plan today?
2. Are your emotions affecting your spending and building your debt?
3. NO MORE Mortgage Tip – Are you keeping an eye on your spending?

The Federal Reserve of Boston recently published a 57 page article on how credit cards are transferring wealth from the poor to the rich.  Who Gains and Loses from Credit Card Payments?

Check out the NO MORE Mortgage Executive Summary on the Credit Cards article below

• Lower income earners tend to make purchases with cash, while higher income earners tend to purchase with credit cards.  There are many more lower income earners than high income earners.
• Stores must pay credit cards companies a fee for the convenience and ability to accept credit card payments from customers.  Stores cannot charge a higher price or a fee for using credit cards in most cases, so stores compensate by increasing the prices for everyone, in order to offset the costs of accepting credit cards from the rich customers.
• Credit Card companies “motivate” the rich to use credit cards by offering rewards in the form of cash back, airline miles, insurance coverage, free warranties, and other “perks”.  These perks are paid for by the fees that credit card companies collect from the stores.  And again, the stores collect their fees in the form of higher rices for everyone.
• According to the Federal Reserve study this process costs the “poor” or cash using households and additional $149 every year.  Meanwhile, each “rich” or credit card using family gets a $1,133 bonus check from their credit card companies, courtesy of the poor folks who pay with cash.

NO MORE Mortgage can show you how to beat the credit card companies, and the banks, at their own game.

The NO MORE Mortgage Financial Plan is designed to put you on a path to debt freedom and financial security, safe from the influences of the banks and credit card companies.

Since 1996 NO MORE Mortgage has adopted the mission to reverse the tide of consumer debt in American, one family at time.  Since then NO MORE Mortgage has reached out to thousands of families in a positive way, to help them achieve financial security.  Contact us today for a no cost, no obligation analysis.  A NO MORE Mortgage representative will review your families financial situation and help you understand how to beat the banks at their own game with proven financial principles and a mathematically guaranteed formula.  There’s no time like the present, and with NO MORE Mortgage, a debt free future can be yours today!

Related posts:

1. NO MORE Mortgage and Credit Cards
2. Reduce Use of Credit Cards
3. 5 Evil Things Credit Card Companies Can Still Do

Credit card companies are socking it to consumers left and right. They’re hiking interest rates to as much as 36% and doubling minimum monthly payments, frustrating customers who are already cash-strapped and credit-crunched. In an effort to curb these abusive practices, President Obama signed into law a credit card reform act in May that’s rolling out in three parts over 12 months. At the same time, credit card companies have been hard at work coming up with new ways to boost profits while sidestepping the reforms. “Card issuers are making sure they can make up the lost money in new ways,” said Bill Hardekopf of Lowcards.com, a research company funded by a commercial debt collector. The first part of the law, which took effect in August, requires banks to give customers more notice ahead of major changes to their accounts, like rate hikes. Starting in February, limits will be imposed on when issuers can raise rates on existing card balances, and on new cards. In August 2010 some credit card penalty fees will be will reined in. But no legislation can fully shield consumers from the credit card industry’s ongoing efforts to boost the bottom line. The worst part? “All of these hikes are taking place simply because they can,” Hardekopf said.

1) RATE HIKES: Interest rates are out of this world. “They’ve increased steadily over the past 5 years, and in general are higher than they’ve ever been,” said Josh Frank, senior researcher at the Center for Responsible Lending (CRL), who says he’s seen annual percentage rates as high as 36%. No current laws cap credit card interest rates, according to Pamela Banks of Consumers Union, the nonprofit publisher of Consumer Reports, so technically the sky’s the limit. But the CARD act will help curb abusive practices. As of February, issuers won’t be able to arbitrarily raise rates on existing balances. But cardholders will still be subject to interest hikes for late payments and various other infractions. And card companies will be able to raise their rates as high as they want, whenever they want, on future purchases even after the reform bill kicks in completely. The act will bring protections for new customers; issuers will no longer be able to hike rates on new accounts in the first 12 months, unless the borrower is delinquent by more than 60 days or the increase is stated in the contract. Keven Vallance recently saw the rate on his Sears card increase from 9.99% to 13.99% for no apparent reason. When Vallance called Sears Credit, which is owned by Citibank, a rep told him every cardholder’s rate is increasing by 4%. Citi spokesman Samuel Wang said in an email that the company has “adjusted pricing and card terms for some customers as part of our regular account reviews.” Consumer outrage is boiling over. Last month, a disgruntled Bank of America customer posted a YouTube video complaining her bank “jacked up my interest rate to a whopping 30% APR.” Her rant went viral, and BofA dropped her rate back to its original 12.99%.

2) NEW FEES: Fees aren’t just rising -they’re multiplying. Cardholders are getting slapped with fees they’ve never seen before. The hitch: New laws can address only existing fees and business practices; they can’t predict what credit card companies will do in the future. “Theoretically, they could create a fee for names that begin with ‘J,’” said Lowcards.com’s Hardekopf. In reality, customers are seeing new annual fees, inactivity charges and more. Not of these charges are unheard of, but many fees that were unusual are becoming commonplace. Earlier this month, for instance, some Bank of America customers were shocked to learn that their no-fee credit cards would be subject to a new annual fee. BofA spokeswoman Betty Riess said the fees are part of a company test that affects 0.5% of all consumer accounts, and that the fees range from $29$99. The charges will be levied in February, and Riess said customers were chosen “based on risk and profitability” but have the option to reject the fees by canceling their accounts. Fifth Third Bank recently introduced a $19 inactivity fee for customers who don’t charge anything for 12 months, and Citibank is hitting some consumers with a fee if they put less than $2,400 on their card annually. To address this problem, House Financial Services Committee Barney Frank (D-Mass.) has proposed a new regulatory body, the Consumer Financial Protection Agency, which would approve new credit card fees. While the House Financial Service Committee approved the agency, it remains to be seen whether legislation will pass; lawmakers are battling over this and other reform proposals floating around Washington.

3) HIGHER MINIMUM MONTHLY PAYMENTS: Banks are also demanding bigger and bigger minimum payments. Chase has bumped up the minimum payment for some consumers to 5% of the monthly balance from 2%. For someone who carries a $5,000 balance, that means the monthly payment of $100 skyrockets to $250 -a whopping 150% increase. Consumer Union’s Pamela Banks says her organization has compiled a wealth of anecdotal evidence that indicates such increases in minimum monthly payments are widespread. “This is making payments virtually impossible for some people,” she said. “It’s throwing people off when they were living on a tight budget anyway.” Some good news is on the way, however. After February, card companies won’t be able to increase monthly minimum payments by more than 100%. For example, a bank cannot increase a 2% minimum payment to any higher than 4%. And this so-called “doubling” will be allowed only once during the life of the card.

4) FEWER REWARDS: Say goodbye to beach vacations and new iPods just for swiping your card. Rewards programs have been enticing shoppers to charge a purchase rather than paying cash -but card issuers are cutting back those perks. “This is happening with a significant amount of cards,” Hardekopf said, adding that many consumers are now receiving 1% cash back instead of the 2% or 3% they once enjoyed. American Express recently cut its Blue Card’s cash back policy from 1.5% to 1.25%. And all AmEx customers who make a late payment will no longer accrue points on their purchases -however, those points can be reinstated with a $29 fee.

5) SLASHED CREDIT LIMITS AND CANCELED ACCOUNTS: Without so much as a call from the bank, some customers are learning their credit limits have been slashed by as much as 75%, or that their accounts have been closed altogether, according to the Center for Responsible Lending’s Josh Frank. Citibank recently closed what a spokesman called a “limited number” of MasterCard gas cards co-branded with Citgo, ExxonMobil, ConocoPhillips and Shell. “People go to make a purchase, and they find out about these huge changes only when they’re denied,” Frank said. “It’s a shock, and it’s been happening a lot.” Even cardholders who don’t charge anything might find their accounts abruptly closed, Frank said. With credit losses at a record high, companies see inactive cards as a red flag and close the accounts to avoid the worry of future writedowns. “Usually cardholders have this credit line available for an emergency, for this kind of current economic situation,” Frank said. “But now they’re turning to it when they need it, and it’s gone.”

What’s a cardholder to do? Consumers must pay close attention to the terms of their contracts, staying alert to any changes. “It’s boring reading, and it can be hard to understand, but that’s where everything is spelled out,” said Lowcards.com’s Hardekopf. Of course, while there are laws aimed at helping consumers, legislation can’t do it all. “As we close the loopholes on some things, they open up elsewhere,” said Consumer Union’s Banks. “Reform acts don’t cover everything, and cardholders have to watch out for their own accounts.” And if you don’t like your credit card’s new terms? “Shop around -you are not married to your card,” Hardekopf said. “It’s a partnership, not a lifelong contract.”

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“I said to them, ‘You’re giving me the option to either shoot myself in the foot or shoot myself in the hand. That’s just unacceptable,’” said Skinner, from Greenville, S.C. She holds only two credit cards, so the hit to her credit score from closing one would be significant. “What am I supposed to do?” she wondered. It’s a frequent question for American consumers these days. Half of all account holders say they’ve been hit either with a higher rate or a lower limit in recent months. While consumers are customarily given the choice to decline the new terms and close the account, doing so flies in the face of all standard advice from personal finance experts because closing credit cards usually has a negative impact on credit scores. “Credit utilization” is one of five important factors used to determine a consumer’s score. Closing a card with a $10,000 limit means the consumer has $10,000 less in credit. If that consumer owes $5,000 on a second card with a $10,000 limit, their utilization just shot from 25 to 50 percent, a credit score killer.

So which bad choice is right for Skinner and other consumers facing the same conundrum? The answer is perhaps even more maddening than the question: “It depends” and “there’s no surefire way to know ahead of time.” But there are some clear guidelines that can help. For starters, closing an account will never help your credit score, despite persistent mythology to the contrary. The only time closing a credit card account is a good idea is when keeping it open will do even more damage than the lowered credit score. No one can say precisely how much closing a credit card account will hurt your credit score -too many other dynamic factors go into calculating the number. Fair Isaac, which owns the credit score formula, says the impact can range from zero points to “dozens of points,” according to spokesman Chris Groppa.

Dozens of points doesn’t sounds so bad, right? Wrong, says Credit.com’s John Ulzheimer, himself a former Fair Isaac employee. “The amount of their score drop isn’t as important as whether or not they cross the lines between approved and declined, and better rate or not as good of a rate,” he said. “Example: If my score goes from 685 to 675 then that’s only 10 points so no big deal, right? But what if (the consumer) applied for a car loan and the lender offered 7.9 percent above 680 and 9.9 percent for someone below 680. Then the 10 points become very meaningful. This isn’t unrealistic as all lenders use score-tiered decision tables.” In other words, if you are planning to buy a house or a car in the next month or two, closing a credit card is a terrible idea -even if your interest rate is about to skyrocket. But outside of that backed-into-a-corner situation, consumers should feel comfortable exercising their right to fire their credit card company and accept the consequences. “People shouldn’t let worry over FICO scores rule their lives,” Groppa said.

For starters, a higher rate will cost money today for anyone who doesn’t pay their balance in full. A credit score drop of 20 points or so might cost you money tomorrow. But you don’t know how much, and you don’t know how long the credit score hit will last. It’s smart to take the sure savings today and close the card. There are strategies for minimizing the negative impact once you do so. First, carrying a low balance or paying off your cards is the best insurance against the penalty of closing a card. If a consumer closes a card and loses $10,000 in available credit, but pays off $10,000 in debt on other cards, the available credit would remain equal and there would be no or minimal impact on a credit score, he said. Of course, that’s not always realistic. A second route to a similar result is to open new credit cards with limits that replace the lost credit.

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