The Death of the Credit Card?

April 13th, 2009 • Related • Filed Under • by trisha

We all know of the current crisis in the credit card industry which was created by card issuers by the raising of rates and fees. The outcry has been deafening. Legislation is pending to help level the playing field in an effort to supply relief to customers.

Could we be seeing the last days of credit cards? While there could be some credibility to that point of view, the more likely reality involves the evolution of credit and how it is offered and managed.

Since markets are cyclical and often fickle in nature, even without additional regulation, the laws of supply and demand would force a shift back towards a customer centric operating philosophy.

Right now, credit card issuers have responded to poor economic conditions by cutting personal credit limits. Consumers have cried ‘foul’ because they have begun to use the credit cards more for necessities like food, gasoline and clothing than at any other time.

But a reduction in credit limits might actually be a blessing in disguise for credit card holders. It might force them to live within their means. The best advice appears to be based on a recommendation to lower dependence on credit while increasing cash to pay for necessary items.

Pay off cards and take a hit. Worrying about taking a hit on your credit score if you close credit card accounts should be a lesser priority right now. Focus on stabilizing your income and making sure that you have a place to live, food on the table and a way to get around. Credit scores and history can be addressed after you have the basics working.

Find ways to remain faithful in paying your debts down. Look to long term benefits of lower debts and higher satisfaction with life overall as a motivator.

Lower expenses and increase savings. Learn to live on less as you look for bargains in places and ways that you normally would have shunned in the past. Nothing is off-limits to help you lower your monthly bills.

Put away money for savings. This means having an amount of cash set aside for emergencies as well as bigger needs. Do not neglect this because it is one step in your strategy that you will eventually need to use. Murphy’s law that say “if something can go wrong, it will” will catch up to you and you will find that you need some cash to get you through.

No matter what the credit market does, you have to take care of your family before anything else. Do so in a responsible manner and then work on improving your situation later after the crisis has passed.