Credit Card Companies Officially Sanctioned Loan Sharks

I am so blooming mad, I am thoroughly disgusted. After nearly 2 harrowing years of aggressively paying down business debt, unfortunately funded by credit cards, on time and always well above the minimum due, we had reached the stage when the light at the end of the tunnel was in reach. But now, all hopes have been dashed as one by one our creditors have reduced our limits and doubled our interest rate for doing the right thing. Are we being punished because we were only paying down and not charging any more? Are we being punished for actually trying to eradicate our credit card debt? Or are we being punished for simply having credit card debt in the first place?

I understand that many people are defaulting on their debt but I show no signs of doing so, the amount of my payments have been consistent for the last 2 years. I have not made a late payment this decade and I've never abused my balance. Yet, I am a liability as far the credit card companies are concerned. Well, since most of them are banks, they have a captive audience that they can raise rates on at any time and are doing so by necessity since the rest of their loan businesses are tanking. It is an odd feeling to have borrowed at a low rate but now be paying it back at an obscenely high rate when you didn't do anything wrong.

I think it is time to revisit the Fair, Isaac credit score (FICO) monopoly. Anytime a credit line is reduced, it increases our debt utilization or debt ratio, the total amount charged in relation to the credit available. This accounts for 30% of your FICO score. If you have a $2,500 balance on a card with a $10,000 limit, you have a debt ratio of 25% but if the credit card company reduces your limit to $5000 then your debt ratio is now a whopping 50%. Debt ratios of 30% reduce credit scores significantly. This sucks. Yet, most of us have little recourse.

We can disagree with a rate change by agreeing to close the account thereby reverting back to the old rate for the remainder of the repayment. I would gladly take this road but, as we have learned by now, closing down credit cards affects our debt ratios. Then again, how much worse can our debt ratios get since closing cards at this juncture may not make any more difference to our scores since the reduction in credit lines has increased many of our ratios above 50%. Yet, this score affects our cost of credit and is now used as a reference factor of employment. A good score means you are a reputable person? That is definitely debatable. Nevertheless, credit scores across the country are being smashed due to the housing and employment crisis. Maybe there is not much to worry about after all. Let the score fall and to hell with it? Maybe.

At the end of the day, no one can really shut all of their credit cards because we still need a credit card for so many transactions that I have a hard time imagining how people get by without them for everything from reservations to large purchases; even if you don't want to use one, it is tough to get around not using one. If consumers now have to pay double the interest for all the purchases they made last year or before, then they really won't have any extra money to spend. Also, their costs to borrow will be too high to take advantage of the low interest rates that are supposedly abounding. Is anyone really qualifying for them? Investors can cheer the banks for making a profit but at what expense.